Netflix NFLX
What does Netflix do?
Netflix operates one of the world's largest streaming entertainment services. Its offering includes series, feature films, documentaries, games and live programming in numerous languages and genres. The content can be accessed on internet-connected devices such as televisions, set-top boxes, streaming players, computers and mobile devices. A significant portion of the programming consists of in-house and commissioned productions, supplemented by licensed content.
The company generates its revenue predominantly from subscription fees, which vary by country, plan tier and feature scope. In addition, there are ad-supported plans, for which advertising revenue plays a role. Competitively, Netflix faces other streaming services from large media groups and technology companies as well as video platforms, game providers and traditional television. Its advantages lie in its international reach, its large user base, the use of data analysis for personalization and the ability to spread content costs across many subscribers.
Score profile
Rank vs. Entertainment (16 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Netflix ranks among the best in the group Entertainment (8.6/10). On growth, the company ranks above average in the group Entertainment (6.3/10). On valuation (higher = cheaper), the stock ranks below average in the group Entertainment (3.6/10). On financial strength, Netflix ranks in the middle in the group Entertainment (5.9/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 16.8x | 15.9x | better than 35 % |
| Trailing P/E | 18.3x | 21.0x | better than 55 % |
| PEG ratio | 1.0x | 1.6x | better than 77 % |
| EV/EBITDA | 17.0x | 12.3x | better than 18 % |
| Price/sales | 5.2x | 1.9x | better than 16 % |
| Price/book | 8.9x | 2.1x | better than 11 % |
| Revenue growth | 11.8% | 8.6% | better than 59 % |
| Earnings growth | 47.5% | 23.2% | better than 66 % |
| Gross margin | 50.7% | 46.8% | better than 66 % |
| Operating margin | 34.6% | 12.1% | better than 97 % |
| Net margin | 29.7% | 6.8% | better than 97 % |
| Return on equity | 53.5% | 8.7% | better than 84 % |
| Debt/equity | 59.9% | 59.8% | better than 47 % |
| Current ratio | 1.1x | 1.1x | better than 47 % |
| Free cash flow yield | 9.8% | 3.9% | better than 82 % |
| Dividend yield | 0.0% | 1.0% | – |
| Payout ratio | 0.0% | 17.9% | – |
| Beta | 1.61 | 1.04 | – |
Valuation: what is Netflix worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Netflix a model range of 45.01 USD to 131.13 USD per share.
43 analysts, average rating “Buy”, average price target 84.76 USD (+34.0%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- The number of paying subscribers and their engagement time determine the base of recurring subscription revenue.
- Pricing, plan structure and the expansion of ad-supported offerings influence average revenue per member.
- Attractive original productions and licensed content retain subscribers and improve the return on high content spending.
Risks
- Intense competition from other streaming services and video platforms can slow subscriber growth and increase cancellations.
- High content spending, much of it paid up front, weighs on earnings and cash flow if productions fail to resonate with audiences.
- Regulation, currency fluctuations and licensing rights in different countries can affect the offering, prices and results.
What to look for with Netflix
Average revenue per member relative to subscriber trends and operating income shows whether pricing and content spending are in balance.