As of July 18, 2023, Netflix Inc (NFLX, Financial) is experiencing a price change of 5.5%, with the stock price currently standing at $474.8. This price is modestly undervalued, according to GuruFocus' GF Value of $643.59, suggesting potential for growth. With a market capitalization of $211.1 billion and sales of $31.9 billion, the company's financial position is robust. An EPS of $9.3 further strengthens the company's outlook.
Netflix Inc (NFLX, Financial) is a global leader in streaming video on demand, with a presence in almost every country except China. The company primarily generates revenue from subscriptions to its service, delivering original and third-party digital video content to various devices. With over 220 million subscribers worldwide, Netflix is the largest SVOD platform globally.
GF Value: A Comprehensive Valuation Method
The GF Value of Netflix (NFLX, Financial) is established through a unique valuation method. This method considers historical trading multiples, an internal adjustment factor based on past performance and growth, and future business performance estimates. At its current price of $474.8 per share, Netflix's stock appears to be modestly undervalued. This suggests that the long-term return of Netflix's stock may be higher than its business growth.
Financial Strength: A Key Consideration
Investing in financially strong companies reduces the risk of permanent capital loss. Netflix's cash-to-debt ratio of 0.54 is lower than 64.36% of companies in the Media - Diversified industry. GuruFocus ranks Netflix's overall financial strength at 6 out of 10, indicating fair financial health.
Profitability: A Measure of Investment Safety
Investing in profitable companies, especially those with consistent long-term profitability, poses less risk. Netflix, with an operating margin of 16.85%, ranks better than 87.48% of companies in the Media - Diversified industry. GuruFocus ranks Netflix's profitability at 10 out of 10, indicating strong profitability.
Growth: The Valuation Game-Changer
Netflix's 3-year average annual revenue growth rate is 16.2%, ranking better than 84.44% of companies in the Media - Diversified industry. Its 3-year average EBITDA growth rate is 19.2%, ranking better than 70.85% of companies in the same industry.
ROIC vs WACC: A Profitability Comparison
Over the past 12 months, Netflix's ROIC was 10.76, while its WACC came in at 13.14. This comparison provides an insight into the company's profitability relative to the capital it has invested in its business.
Conclusion: A Modestly Undervalued Opportunity
Overall, Netflix (NFLX, Financial) appears to be modestly undervalued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 70.85% of companies in the Media - Diversified industry. For more information on Netflix stock, refer to its 30-Year Financials here.
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