What is Netflix Probability of Financial Distress (%)?
Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, Netflix's Probability of Financial Distress (%) is 0.02%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Competitive Comparison of Netflix's Probability of Financial Distress (%)
For the Entertainment subindustry, Netflix's Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Netflix's Probability of Financial Distress (%) Distribution in the Media - Diversified Industry
For the Media - Diversified industry and Communication Services sector, Netflix's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where Netflix's Probability of Financial Distress (%) falls into.
Netflix Probability of Financial Distress (%) Calculation
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
| LPFD | = | -20.12 * NIMTAAVG | + | 1.60 * TLMTA | - | 7.88 * EXRETAVG | + | 1.55 * SIGMA | - | 0.005 * RSIZE | - | 2.27 * CASHMTA | + | 0.070 * MB | - | 0.09 * PRICE | - | 8.87 |
| = | -8.34 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 0.02% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.
2. TLMTA = Total liabilities to Market Total Assets
3. CASHMTA = Cash to Market Total Assets
For non-financial companies, CASHMTA is measured as:
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
6. RSIZE = Relative Size
| RSIZE | = | log (Market Cap | / | Total Market Cap of S&P 500 companies) |
7. MB = Market to Adjusted Book Equity Ratio
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
Netflix (NFLX) Business Description
Traded in Other Exchanges
Address
121 Albright Way, Los Gatos, CA, USA, 95032
Netflix's relatively simple business model involves only one business, its streaming service. It has the biggest television entertainment subscriber base in both the United States and the collective international market, with almost 250 million subscribers globally. 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.
Executives
| Reed Hastings |
director, 10 percent owner, officer: CEO, other: CEO |
121 ALBRIGHT WAY, LOS GATOS CA 95032 |
| Ann Mather |
director |
|
| Gregory K Peters |
officer: Intl. Development Officer |
C/O NETFLIX, INC., 121 ALBRIGHT WAY, LOS GATOS CA 95032 |
| Richard N Barton |
director |
C/O IAC, 152 WEST 57TH STREET, NEW YORK NY 10019 |
| David A Hyman |
officer: General Counsel |
C/O NETFLIX, INC., 121 ALBRIGHT WAY, LOS GATOS CA 95032 |
| Theodore A Sarandos |
officer: Chief Content Officer |
C/O NETFLIX, INC, 121 ALBRIGHT WAY, LOS GATOS CA 95032 |
| Jay C Hoag |
director |
250 MIDDLEFIELD ROAD, MENLO PARK CA 94025 |
| Timothy M Haley |
director |
3000 SAND HILL ROAD, 2-290, MENLO PARK CA 94025 |
| Jeffrey William Karbowski |
officer: Chief Accounting Officer |
121 ALBRIGHT WAY, LOS GATOS CA 95032 |
| Kenneth A Barker |
officer: Chief Accounting Officer |
C/O ELECTRONIC ARTS INC., 209 REDWOOD SHORES PARKWAY, REDWOOD CITY CA 94065 |
| Dicus Marian Lee |
officer: Chief Marketing Officer |
526 WEST 111TH STREET, APARTMENT 3C, NEW YORK NY 10025 |
| Meabe Sergio Ezama |
officer: Chief Talent Officer |
59 HILLSIDE ROAD, GREENWICH CT 06830 |
| Jessica Neal |
officer: Chief Talent Officer |
100 WINCHESTER CIRCLE, LOS GATOS CA 95032 |
| Strive Masiyiwa |
director |
265 FRANKLIN STREET, BOSTON MA 02110 |
| John Bozoma Saint |
officer: Chief Marketing Officer |
9255 SUNSET BLVD 2ND FLOOR, LOS ANGELES CA 90069 |
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