Netflix Inc. Stock Hold Recommendation Reiterated (NFLX)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Netflix (Nasdaq: NFLX) has been reiterated by TheStreet Ratings as a hold with a ratings score of C . The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass

Highlights from the ratings report include:
  • NFLX's revenue growth trails the industry average of 20.4%. Since the same quarter one year prior, revenues rose by 10.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for NETFLIX INC is currently very high, coming in at 74.90%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 0.80% trails the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Internet & Catalog Retail industry and the overall market, NETFLIX INC's return on equity is below that of both the industry average and the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 87.7% when compared to the same quarter one year ago, falling from $62.46 million to $7.68 million.

Netflix, Inc. provides Internet subscription services for TV shows and movies in the United States and internationally. The company offers its subscribers to watch unlimited TV shows and movies streamed over the Internet to their TVs, computers, and mobile devices. Netflix has a market cap of $4.22 billion and is part of the services sector and specialty retail industry. The company has a P/E ratio of 96.2, above the S&P 500 P/E ratio of 17.7. Shares are up 9.6% year to date as of the close of trading on Friday.

You can view the full Netflix Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

FREE for a limited time only: Get TheStreet Ratings #1 Stock Report NOW!
null

If you liked this article you might like

What's Likely Behind Amazon's Reported Interest in Buying a Slew of TV Channels

Netflix's Tough Loss to Hulu at the Emmys: Why It Matters

Global Stock Markets Have Lost Their Minds and It's Becoming Pretty Disturbing

3 Tech Setups That Look Tantalizing

Hulu Threatens Landmark Networks With Prestigious Emmy Win