Netflix Inc

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NFLX : NASDAQ : Services
$85.89 | %
Today's Range: 85.11 - 86.50
Avg. Daily Volume: 12,971,500
07/22/16 - 4:00 PM ET

Financial Analysis


NETFLIX INC's gross profit margin for the second quarter of its fiscal year 2016 is essentially unchanged when compared to the same period a year ago. Even though it increased sales and net income significantly, the company was unable to grow at a faster pace than its industry competitors. NETFLIX INC has very weak liquidity. Currently, the Quick Ratio is 0.45 which clearly shows a lack of ability to cover short-term cash needs. The liquidity decreased from the same period a year ago, despite already having weak liquidity to begin with. This would indicate deteriorating cash flow.

During the same period, stockholders' equity ("net worth") has increased by 18.88% from the same quarter last year. The key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the near future.

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Income Statement Q2 FY16 Q2 FY15
Net Sales ($mil)2105.21644.69
EBITDA ($mil)1279.88933.83
EBIT ($mil)70.3774.84
Net Income ($mil)40.7626.34


Balance Sheet Q2 FY16 Q2 FY15
Cash & Equiv. ($mil)1834.232796.76
Total Assets ($mil)11593.519654.86
Total Debt ($mil)2373.092400.0
Equity ($mil)2415.832032.08


Profitability Q2 FY16 Q2 FY15
Gross Profit Margin87.4884.02
EBITDA Margin60.7956.77
Operating Margin3.344.55
Sales Turnover0.660.63
Return on Assets1.211.99
Return on Equity5.839.48
Debt Q2 FY16 Q2 FY15
Current Ratio1.331.74
Debt/Capital0.50.54
Interest Expense35.4635.22
Interest Coverage1.982.13


Share Data Q2 FY16 Q2 FY15
Shares outstanding (mil)428.29426.01
Div / share0.00.0
EPS0.090.06
Book value / share5.644.77
Institutional Own % n/a n/a
Avg Daily Volume1.3063971E71.795035E7

Valuation


HOLD. NETFLIX INC's P/E ratio indicates a significant premium compared to an average of 224.27 for the Internet & Catalog Retail industry and a significant premium compared to the S&P 500 average of 25.07. For additional comparison, its price-to-book ratio of 17.52 indicates a significant premium versus the S&P 500 average of 2.81 and a discount versus the industry average of 17.65. The price-to-sales ratio is well above both the S&P 500 average and the industry average, indicating a premium. The valuation analysis reveals that, NETFLIX INC seems to be trading at a premium to investment alternatives within the industry.


Price/Earnings
1 2 3 4 5
premium   discount
  Price/Cash Flow
1 2 3 4 5
premium   discount
NFLX 308.78 Peers 224.27   NFLX NM Peers 31.82

Premium. A higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations.

NFLX is trading at a significant premium to its peers.

 

Neutral. The P/CF ratio, a stock’s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures.

NFLX's P/CF is negative making the measure meaningless.

 
Price/Projected
Earnings
1 2 3 4 5
premium   discount
  Price to
Earnings/Growth
1 2 3 4 5
premium   discount
NFLX 94.10 Peers 143.25   NFLX NM Peers 0.91

Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations.

NFLX is trading at a significant premium to its peers.

 

Neutral. The PEG ratio is the stock’s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples.

NFLX's negative PEG ratio makes this valuation measure meaningless.

 
Price/Book
1 2 3 4 5
premium   discount
  Earnings Growth
1 2 3 4 5
lower   higher
NFLX 17.52 Peers 17.65   NFLX -27.98 Peers 260.49

Average. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet.

NFLX is trading at a valuation on par with its peers.

 

Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios.

However, NFLX is expected to significantly trail its peers on the basis of its earnings growth rate.

 
Price/Sales
1 2 3 4 5
premium   discount
  Sales Growth
1 2 3 4 5
premium   discount
NFLX 5.55 Peers 3.61   NFLX 24.74 Peers 23.77

Premium. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales.

NFLX is trading at a significant premium to its industry.

 

Average. Comparing a company's sales growth to its industry helps to determine if the company is adding or losing market share.

NFLX is keeping pace with its peers on the basis of sales growth.

 

 

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