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 $589.54, Netflix Inc has witnessed a daily loss of 0.66%, marked against a three-month change of 28.53%. 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: 10/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 9/10
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 93 out of 100, which signals the highest outperformance potential.
Understanding Netflix Inc's Business
Netflix Inc, with a market cap of $255.13 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 has exposure to nearly the entire global population outside of China. The firm has traditionally avoided live programming or sports content, instead focusing on on-demand access to episodic television, movies, and documentaries. The firm recently began introducing ad-supported subscription plans, giving the firm exposure to the advertising market in addition to the subscription fees that have historically accounted for nearly all its revenue.
Financial Strength Breakdown
According to the Financial Strength rating, Netflix Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Netflix Inc stands impressively at 8.48, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With an Altman Z-Score of 7.32, Netflix Inc exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.43, Netflix Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Netflix Inc's impressive standing among its peers in generating profit. Netflix Inc's Operating Margin has increased over the past five years, with a current figure of 20.62%. Furthermore, Netflix Inc's Gross Margin has also seen a consistent rise over the past five years, indicating the company's growing proficiency in transforming revenue into profit. The Piotroski F-Score confirms Netflix Inc's solid financial situation, and its strong Predictability Rank of 4.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Netflix Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 10.9%, which outperforms better than 76.62% of companies in the Media - Diversified industry. Moreover, Netflix Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years, with a three-year growth rate of 11.9 and a five-year rate of 18.8. This trend accentuates the company's continued capability to drive growth.
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 approach to its business model, consistent operational performance, and commitment to growth are key indicators of its ability to maintain a competitive edge in the market. Investors looking for companies with similar potential can explore more options with the GF Score Screen provided by GuruFocus Premium membership.
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.
