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 $559.73, Netflix Inc has witnessed a daily loss of 0.4%, marked against a three-month change of 36.71%. 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: 9/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 10/10
Netflix Inc's GF Score of 92 out of 100 signals the highest outperformance potential, with particularly high ranks in Growth and Momentum, and a solid Financial Strength rank. The Profitability rank is also impressive, while the GF Value rank is lower, suggesting the stock may be overvalued at current prices.
Understanding Netflix Inc's Business
Netflix Inc, with a market cap of $244.98 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's reach extends to almost the entire global population outside of China. The company has traditionally steered clear of live programming or sports content, focusing instead on on-demand access to episodic television, movies, and documentaries. Recently, Netflix has ventured into ad-supported subscription plans, tapping into the advertising market in addition to its subscription-based revenue.
Financial Strength Breakdown
Netflix Inc's Financial Strength rating reflects a resilient balance sheet, with an Interest Coverage ratio of 7.37, indicating a strong ability to cover interest obligations. The Altman Z-Score of 7.1 further highlights its defense against financial distress. A Debt-to-Revenue ratio of 0.43 demonstrates Netflix Inc's strategic debt management, reinforcing its financial health.
Profitability Rank Breakdown
The Profitability Rank of Netflix Inc is notable, with an increasing Operating Margin over the past five years, reaching 20.62% in 2023. The company's Gross Margin also shows a consistent upward trend, indicating improved efficiency in converting revenue into profit. The Piotroski F-Score and a Predictability Rank of 5 stars further confirm Netflix Inc's solid financial situation and consistent operational performance.
Growth Rank Breakdown
Netflix Inc's high Growth rank reflects its commitment to expansion, with a 3-Year Revenue Growth Rate of 10.9%, outperforming 76.44% of its industry peers. The company's EBITDA has also seen significant growth, with a three-year growth rate of 11.9 and a five-year rate of 18.8, highlighting its growth capabilities.
Conclusion: Netflix Inc's Path to Outperformance
Considering Netflix Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. With a strong balance sheet, impressive profit margins, and a commitment to growth, Netflix Inc is a compelling choice for investors looking for market-leading performance. As the company continues to innovate and expand its business model, it remains a standout in the competitive streaming industry.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
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.
