Netflix Inc (NFLX, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $568.45, Netflix Inc has witnessed a daily loss of 0.35%, marked against a three-month change of 41.35%. A thorough analysis, underlined by the GF Score, suggests that Netflix Inc is well-positioned for substantial growth in the near future.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 7/10
- Profitability rank: 9/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 10/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, and growth, but a lower GF Value rank, GuruFocus assigned Netflix Inc the GF Score of 92 out of 100, which signals the highest outperformance potential.
Understanding Netflix Inc's Business
Netflix Inc, with a market cap of $248.80 billion and sales of $33.72 billion, operates a relatively simple business model focused solely on its streaming service. It boasts the largest television entertainment subscriber base in both the United States and internationally, with nearly 250 million subscribers worldwide. Netflix's reach extends to almost the entire global population outside of China. The company has traditionally steered clear of live programming or sports content, instead prioritizing on-demand access to episodic television, movies, and documentaries. Recently, Netflix has ventured into ad-supported subscription plans, diversifying its revenue streams beyond subscription fees to include advertising market exposure.
Financial Strength Breakdown
Netflix Inc's Financial Strength rating reflects a resilient balance sheet, indicative of prudent capital management. The company's Interest Coverage ratio of 7.37 demonstrates a strong ability to meet interest obligations, aligning with the principles of legendary investor Benjamin Graham. Furthermore, an Altman Z-Score of 7.17 signals a robust defense against financial distress, and a Debt-to-Revenue ratio of 0.43 showcases Netflix Inc's strategic debt management.
Profitability Rank Breakdown
The Profitability Rank highlights Netflix Inc's strong profit generation capabilities. The company's Operating Margin has seen a significant increase over the past five years, with a current margin of 20.62%. Additionally, Netflix Inc's Gross Margin has consistently improved, indicating an enhanced ability to convert revenue into profit. The Piotroski F-Score further confirms the company's solid financial health, while a Predictability Rank of 4.5 stars out of five reflects its consistent operational performance.
Growth Rank Breakdown
Netflix Inc's high Growth rank underscores its commitment to business expansion. The company's 3-Year Revenue Growth Rate of 10.9% surpasses 76.39% of competitors in the Media - Diversified industry. Netflix Inc's EBITDA has also seen a robust increase, with a three-year growth rate of 11.9 and a five-year rate of 18.8, highlighting its growth capabilities.
Conclusion: Netflix Inc's Position for Outperformance
Considering Netflix Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. The company's strategic initiatives, such as the introduction of ad-supported plans, and its consistent operational excellence, position it favorably in the competitive streaming landscape. Investors seeking companies with strong GF Scores can explore further using the GF Score Screen provided by GuruFocus Premium.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
