With social distancing policies in place due to the coronavirus pandemic, Netflix has become one of the remaining sources of entertainment left for millions of people around the world. Investors looking to find value in the stock market may see the current situation as a good time to buy shares in Netflix. Netflix, Inc (NASDAQ: NFLX) is an American media production and streaming company based in California. It is available in over 190 countries, and has over 150 million subscribers worldwide.
|52-week range||$290.25 - $583.99|
|50-day moving average||$536.9015|
|200-day moving average||$511.3817|
|Wall St. target price||$619.73|
|Dividend yield||N/A (0%)|
|Earnings per share (TTM)||$6.08|
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Valuing Netflix stock is incredibly difficult, and any metric has to be viewed as part of a bigger picture of Netflix's overall performance. However, analysts commonly use some key metrics to help gauge the value of a stock.
Netflix's current share price divided by its per-share earnings (EPS) over a 12-month period gives a "trailing price/earnings ratio" of roughly 90x. In other words, Netflix shares trade at around 90x recent earnings.
That's relatively high compared to, say, the trailing 12-month P/E ratio for the NASDAQ 100 at the end of 2019 (27.29). The high P/E ratio could mean that investors are optimistic about the outlook for the shares or simply that they're over-valued.
However, Netflix's P/E ratio is best considered in relation to those of others within the entertainment industry or those of similar companies.
Netflix's "price/earnings-to-growth ratio" can be calculated by dividing its P/E ratio by its growth – to give 2.4679. A low ratio can be interpreted as meaning the shares offer better value, while a higher ratio can be interpreted as meaning the shares offer worse value.
The PEG ratio provides a broader view than just the P/E ratio, as it gives more insight into Netflix's future profitability. By accounting for growth, it could also help you if you're comparing the share prices of multiple high-growth companies.
However, it's sensible to consider Netflix's PEG ratio in relation to those of similar companies.
Netflix's EBITDA (earnings before interest, taxes, depreciation and amortisation) is a whopping $4.7 billion (£3.4 billion).
The EBITDA is a measure of a Netflix's overall financial performance and is widely used to measure a its profitability.
To put Netflix's EBITDA into context you can compare it against that of similar companies.
|Revenue TTM||$25 billion|
|Operating margin TTM||18.34%|
|Gross profit TTM||$9.7 billion|
|Return on assets TTM||7.82%|
|Return on equity TTM||29.62%|
|Market capitalisation||$241.9 billion|
TTM: trailing 12 months
There are currently 7.3 million Netflix shares held short by investors – that's known as Netflix's "short interest". This figure is 1.5% up from 7.2 million last month.
There are a few different ways that this level of interest in shorting Netflix shares can be evaluated.
Netflix's "short interest ratio" (SIR) is the quantity of Netflix shares currently shorted divided by the average quantity of Netflix shares traded daily (recently around 6.9 million). Netflix's SIR currently stands at 1.06. In other words for every 100,000 Netflix shares traded daily on the market, roughly 1060 shares are currently held short.
To gain some more context, you can compare Netflix's short interest ratio against those of similar companies.
However Netflix's short interest can also be evaluated against the total number of Netflix shares, or, against the total number of tradable Netflix shares (the shares that aren't held by "insiders" or major long-term shareholders – also known as the "float"). In this case Netflix's short interest could be expressed as 0.02% of the outstanding shares (for every 100,000 Netflix shares in existence, roughly 20 shares are currently held short) or 0.0168% of the tradable shares (for every 100,000 tradable Netflix shares, roughly 17 shares are currently held short).
Such a low SIR usually points to an optimistic outlook for the share price, with fewer people currently willing to bet against Netflix.
Find out more about how you can short Netflix stock.
Environmental, social and governance (known as ESG) criteria are a set of three factors used to measure the sustainability and social impact of companies like Netflix.
When it comes to ESG scores, lower is better, and lower scores are generally associated with lower risk for would-be investors.
Total ESG risk: 21.55
Socially conscious investors use ESG scores to screen how an investment aligns with their worldview, and Netflix's overall score of 21.55 (as at 01/01/2019) is excellent – landing it in it in the 19th percentile of companies rated in the same sector.
ESG scores are increasingly used to estimate the level of risk a company like Netflix is exposed to within the areas of "environmental" (carbon footprint, resource use etc.), "social" (health and safety, human rights etc.), and "governance" (anti-corruption, tax transparency etc.).
To gain some more context, you can compare Netflix's total ESG risk score against those of similar companies.
Environmental score: 3.16/100
Netflix's environmental score of 3.16 puts it squarely in the 6th percentile of companies rated in the same sector. This could suggest that Netflix is a leader in its sector terms of its environmental impact, and exposed to a lower level of risk.
Social score: 10.56/100
Netflix's social score of 10.56 puts it squarely in the 6th percentile of companies rated in the same sector. This could suggest that Netflix is a leader in its sector when it comes to taking good care of its workforce and the communities it impacts.
Governance score: 15.32/100
Netflix's governance score puts it squarely in the 6th percentile of companies rated in the same sector. That could suggest that Netflix is a leader in its sector when it comes to responsible management and strategy, and exposed to a lower level of risk.
Controversy score: 2/5
ESG scores also evaluate any incidences of controversy that a company has been involved in. A high-profile company, Netflix scored a 2 out of 5 for controversy – the second-highest score possible, reflecting that Netflix has, for the most part, managed to keep its nose clean.
Wondering how that compares? Below are the controversy scores of similar companies.
|Total ESG score||21.55|
|Total ESG percentile||19.25|
|Environmental score percentile||6|
|Social score percentile||6|
|Governance score percentile||6|
|Level of controversy||2|
We're not expecting Netflix to pay a dividend over the next 12 months. However, you can browse other dividend-paying shares in our guide.
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Netflix's shares were split on a 7:1 basis on 15 July 2015. So if you had owned 1 share the day before before the split, the next day you'd have owned 7 shares. This wouldn't directly have changed the overall worth of your Netflix shares – just the quantity. However, indirectly, the new 85.7% lower share price could have impacted the market appetite for Netflix shares which in turn could have impacted Netflix's share price.
Over the last 12 months, Netflix's shares have ranged in value from as little as $290.25 up to $583.99. A popular way to gauge a stock's volatility is its "beta".
Beta is a measure of a share's volatility in relation to the market. The market (NASDAQ average) beta is 1, while Netflix's is 0.8324. This would suggest that Netflix's shares are less volatile than average (for this exchange).
To put Netflix's beta into context you can compare it against those of similar companies.
Netflix, Inc. provides entertainment services. It offers TV series, documentaries, and feature films across various genres and languages. The company provides members the ability to receive streaming content through a host of Internet-connected devices, including TVs, digital video players, television set-top boxes, and mobile devices. It also provides DVDs-by-mail membership services. The company has approximately 204 million paid members in 190 countries. Netflix, Inc. was founded in 1997 and is headquartered in Los Gatos, California.
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