Insights

• Netflix demonstrates strong financial health with consistent revenue growth and improving profitability, significantly outperforming industry averages in key profitability metrics.
• The company maintains adequate liquidity and a moderate level of financial leverage, indicating a stable financial position.
• Strategic investments in content and technology are driving operational efficiency and supporting long-term growth.
• Netflix faces ongoing risks related to competition, content costs, and regulatory changes, which require careful management.
• Overall, Netflix is well-positioned for continued success in the streaming entertainment market, with a clear focus on long-term growth and shareholder value.

Analysis

• Revenue - Revenue growth is strong and consistent, driven by increases in membership and pricing. - The company is successfully expanding its global reach and attracting new subscribers. - Revenue growth is expected to continue, supported by investments in original content and marketing.

  • Profitability

    • Profitability is improving, as evidenced by increasing gross, operating, and net profit margins.
    • Effective cost management and expense control are contributing to higher profitability.
    • Netflix's profitability metrics are significantly above the industry average, demonstrating its competitive advantage.

  • Liquidity

    • The current ratio indicates adequate liquidity to cover short-term liabilities.
    • Strong operating cash flow provides ample liquidity for ongoing operations and strategic initiatives.
    • The company's liquidity position is expected to remain healthy, supported by strong cash generation.

  • Solvency

    • The debt-to-equity ratio suggests a moderate level of financial leverage.
    • The company's debt levels are manageable, and it has a strong ability to cover its debt obligations.
    • Netflix's solvency position is expected to remain stable, supported by its strong cash flow and earnings.

  • Operational Efficiency

    • Netflix is efficiently utilizing its assets to generate revenue and profit.
    • The company's investments in content and technology are driving improved operational efficiency.
    • Netflix's operational efficiency metrics are above the industry average, demonstrating its competitive advantage.

  • Cash Flow Analysis - Strong operating cash flow provides ample liquidity for short-term obligations. - Free cash flow generation supports long-term solvency and financial flexibility. - The free cash flow margin is trending upward, indicating improved profitability and cash generation efficiency.

  • Risk Factors

    • Competition from other streaming services and entertainment options remains a key risk.
    • Content acquisition and production costs could impact profitability.
    • Regulatory changes and evolving privacy laws could create challenges for the company.

  • Future Outlook

    • Netflix is well-positioned for continued growth and success in the streaming entertainment market.
    • The company's strong financial performance, effective management, and strategic investments are expected to drive future earnings growth.
    • Netflix's focus on long-term growth and improving the member experience should enable it to maintain its competitive advantage.

Benchmarks (as of 2025-06-06)

• Performance Comparison:
  • Netflix (NFLX) has significantly outperformed the Technology Select Sector SPDR Fund (XLK) across all measured time periods. For instance, the Year-To-Date return for NFLX is 40.01% compared to only 2.94% for XLK. Over a longer three-year period, NFLX has returned 578.62% versus 86.46% for XLK. This demonstrates a strong history of outperformance by NFLX relative to XLK.
• Risk and Return Analysis:
  • NFLX has provided higher annualized returns compared to XLK. The three-year annualized return for NFLX is 89.33%, while XLK's is 23.08%. This indicates that NFLX has been more profitable on an annual basis.
  • However, NFLX has also exhibited higher annualized volatility. For example, in Q2 2022, NFLX's volatility ranged from 60.93% to 69.82%, while XLK's ranged from 37.06% to 40.71%. This suggests that NFLX's returns come with greater risk.
  • The maximum drawdown for NFLX was -75.78% on 2022-06-14, significantly larger than XLK's maximum drawdown of -33.56% on 2022-10-12. This indicates that NFLX is prone to more substantial declines from its peak value compared to XLK.
• Risk-Adjusted Performance:
  • NFLX's Sharpe Ratio has fluctuated, but in recent periods, it has generally been higher than XLK's. For example, as of Q2 2025, NFLX shows a Sharpe ratio range of 2.06 to 2.4, while XLK shows a Sharpe ratio range of 0.31 to 0.57. This suggests that NFLX offers better risk-adjusted returns compared to XLK.
  • The Beta value for NFLX has decreased over time and is now fluctuating around 1, while XLK's Beta remains consistently above 1. This indicates that NFLX's sensitivity to market movements has decreased, while XLK continues to amplify market movements.
• Overall Assessment:
  • Netflix (NFLX) has demonstrated superior performance and risk-adjusted returns compared to the Technology Select Sector SPDR Fund (XLK), especially in recent periods. While NFLX exhibits higher volatility and larger drawdowns, its higher Sharpe Ratio suggests that it compensates investors adequately for the increased risk. The decreasing Beta value indicates that NFLX is becoming less sensitive to overall market movements. These trends suggest that NFLX may be a more attractive investment option for investors seeking higher returns, provided they are comfortable with the associated volatility.

Peers Price History(as of 2025-06-06)

• Performance Comparison:

  • Netflix (NFLX) has significantly outperformed both Comcast (CMCSA) and The Walt Disney Company (DIS) across all measured time periods, from year-to-date to the past three years. For example, over the last three years, NFLX has returned 578.62%, while CMCSA has returned -8.66% and DIS has returned 16.0%. This demonstrates a substantial outperformance by Netflix compared to its peers.

• Risk and Return Analysis:

  • Netflix (NFLX) has provided higher annualized returns compared to Comcast (CMCSA) and The Walt Disney Company (DIS). Over the past three years, NFLX's annualized return was 89.33%, while CMCSA's was -2.97% and DIS's was 5.07%.
  • Netflix (NFLX) has generally exhibited higher annualized volatility compared to Comcast (CMCSA) and The Walt Disney Company (DIS). This higher volatility suggests that NFLX's price experiences larger fluctuations compared to its peers.
  • Netflix (NFLX) experienced a maximum drawdown of -75.78% on 2022-06-14, which is significantly larger than Comcast (CMCSA) at -52.11% and The Walt Disney Co. (DIS) at -57.33%. This indicates that NFLX is more susceptible to significant declines from its peak value compared to its peers, suggesting a higher risk profile.

• Risk-Adjusted Performance:

  • Netflix (NFLX) generally had higher Sharpe Ratios compared to Comcast (CMCSA) and Disney (DIS) in recent periods, indicating better risk-adjusted returns.
  • Netflix (NFLX) generally had a beta above 1, indicating that it is more volatile than the market. Comcast (CMCSA) generally had a beta below 1, indicating that it is less volatile than the market. Disney (DIS) had a beta around 1, indicating that it has similar volatility to the market.

• Overall Assessment:

  • Netflix (NFLX) has demonstrated superior performance compared to Comcast (CMCSA) and The Walt Disney Co. (DIS) across various metrics, including historical performance, annualized returns, and risk-adjusted returns. However, NFLX also exhibits higher volatility and a larger maximum drawdown, indicating a higher risk profile. Investors should consider their risk tolerance and investment objectives when evaluating NFLX compared to its peers.

Peers Fundamentals(as of 2025-03-31)

1. Market Position and Size:

   • Netflix (NFLX) has a significantly larger market capitalization of 484167.87 million compared to Comcast (CMCSA) at 128775.46 million and The Walt Disney Company (DIS) at 166624.0 million.
   • Despite the largest market cap, NFLX's revenue of 39873.3 million is considerably less than both CMCSA (123560 million) and DIS (93601 million). This indicates a higher valuation multiple relative to its revenue.
   • NFLX's EBITDA (26608.5 million) is less than CMCSA's (38246 million) but greater than DIS's (18377 million). Its net income (9269.77 million) is less than CMCSA's (15709 million) but slightly greater than DIS's (8910 million).
   • NFLX holds a dominant market position in terms of market capitalization, but its revenue lags behind its peers, suggesting a premium valuation based on growth expectations or other factors.

2. Profitability and Efficiency:

   • NFLX has a Gross Profit Margin of 46.52%, which is less than CMCSA's 58.14% but greater than DIS's 31.38%. It is significantly greater than the industry average of -43.06%.
   • NFLX's EBITDA Margin is 66.73%, substantially greater than CMCSA's 30.95% and DIS's 19.63%, and far exceeds the industry average of -779.5%.
   • NFLX's Net Profit Margin is 23.25%, greater than CMCSA's 12.71% and DIS's 9.52%, and significantly greater than the industry average of -1437.76%.
   • Despite having lower revenue than its peers, NFLX demonstrates superior profitability margins, indicating efficient cost management and a strong pricing strategy.
   • NFLX is overperforming in profitability metrics compared to both its peers and industry standards, particularly in EBITDA and Net Profit Margins.

3. Financial Health and Stability:

   • NFLX has a Current Ratio of 1.2, greater than CMCSA's 0.65 and DIS's 0.64, but less than the industry average of 2.8.
   • NFLX has a Quick Ratio of 1.2, greater than CMCSA's 0.65 and DIS's 0.58, but less than the industry average of 2.76.
   • NFLX's Total Debt to Total Equity Ratio is 72.51, less than CMCSA's 114.41 but greater than DIS's 41.11. It is also less than the industry average of 134.1.
   • NFLX's Debt / EBITDA is 0.56, less than CMCSA's 2.59 and DIS's 2.33, and significantly less than the industry average of 10.43.
   • NFLX's liquidity position, as indicated by its current and quick ratios, is moderate but below the industry average. Its debt levels relative to equity and EBITDA are well-managed compared to its peers and the industry.

4. Valuation and Market Perception:

   • NFLX has an Enterprise Value To Sales ratio of 10.45, significantly greater than CMCSA's 1.87 and the industry average of 5.65.
   • NFLX has an Enterprise Value To EBITDA ratio of 15.56, significantly greater than CMCSA's 6.03, but less than the industry average of 83.6.
   • NFLX has a Price To Earnings ratio of 53.76, significantly greater than CMCSA's 8.47 and DIS's 18.83, and approximately equal to the industry average of 54.74.
   • NFLX has a Price to Book Ratio of 20.16, significantly greater than CMCSA's 1.49 and DIS's 1.72, and significantly greater than the industry average of 6.1.
   • NFLX has a Price To Sales Ratio of 12.47, significantly greater than CMCSA's 1.06 and DIS's 1.79, and significantly greater than the industry average of 5.68.
   • NFLX's valuation metrics suggest that it is trading at a premium compared to its peers and the industry, reflecting high growth expectations and market confidence.

5. Cash Flow and Capital Management:

   • NFLX has a Net Operating Cash Flow of 7938.04 million, less than CMCSA's 28120 million and DIS's 18078 million.
   • NFLX has a Total Capital Expenditure of 492.1 million, significantly less than CMCSA's 14695 million and DIS's 7182 million.
   • NFLX has a Free Cash Flow of 7445.94 million, less than CMCSA's 13425 million and DIS's 10896 million.
   • NFLX's cash flow generation is strong, but less than its larger peers. Its lower capital expenditure contributes to a relatively healthy free cash flow.
   • NFLX's Cash Conversion Ratio is 1.04, greater than CMCSA's 0.41 and DIS's 0.48, and significantly greater than the industry average of -0.78.

6. Growth and Future Prospects:

   • NFLX demonstrates superior growth in sales/revenue, EBITDA, net income, and basic earnings per share compared to its peers. This indicates strong market demand for its services and effective monetization strategies.
   • NFLX's free cash flow and free cash flow margin growth rates are significantly lower than its peers, primarily due to substantial investments in content creation and expansion. This could be a concern if not managed effectively.
   • NFLX's growth rates have generally been decreasing over the past 5 years, as indicated by the lower 3-year CAGRs compared to the 5-year CAGRs.
   • However, the most recent year-over-year growth rates for sales/revenue, EBITDA, net income, basic earnings per share, and EBIT margin are higher than their respective 5-year CAGRs, suggesting a potential acceleration in growth.

7. Potential for Investment:

   • NFLX presents a compelling investment opportunity due to its superior profitability, high returns on capital, and robust growth rates.
   • Its premium valuation reflects investor confidence in its future prospects, but also poses a risk if growth expectations are not met.
   • While its cash flow generation is less than its larger peers and its liquidity is moderate, its well-managed debt levels and strong financial performance make it an attractive investment option within the entertainment services industry.

8. Key Risks and Considerations:

   • NFLX's premium valuation could pose a risk if growth expectations are not met.
   • Its lower cash flow generation compared to larger peers could limit its ability to invest in future growth opportunities.
   • Its moderate liquidity position could make it vulnerable to unexpected financial challenges.
   • Increased competition in the streaming entertainment industry could erode its market share and profitability.

9. Overall Assessment:

   • NFLX demonstrates strong financial health characterized by superior profitability, high returns on capital, and robust growth rates.
   • While its cash flow generation is less than its larger peers and its liquidity is moderate, its well-managed debt levels and premium valuation reflect investor confidence in its future prospects.
   • NFLX's financial performance positions it as a leader in the entertainment services industry, but investors should carefully consider the potential risks associated with its premium valuation and competitive landscape.