NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally poor debt management.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 20.0%. Since the same quarter one year prior, revenues rose by 48.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NETFLIX INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NETFLIX INC increased its bottom line by earning $2.96 versus $1.99 in the prior year. This year, the market expects an improvement in earnings ($4.10 versus $2.96).
- NFLX's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 55.30%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- NFLX's debt-to-equity ratio of 0.60 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.38 is very low and demonstrates very weak liquidity.
Netflix, Inc. provides subscription based Internet services for TV shows and movies in the United States and internationally. The company allows its subscribers to watch unlimited TV shows and movies streamed over the Internet to their televisions, computers, and mobile devices. The company has a P/E ratio of 17.6, equal to the average specialty retail industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Netflix has a market cap of $4.1 billion and is part of the
industry. Shares are down 54.8% year to date as of the close of trading on Thursday.
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