Amidst the fast-paced and highly competitive business environment of today, conducting comprehensive company analysis is essential for investors and industry enthusiasts. In this article, we will delve into an extensive industry comparison, evaluating Netflix (NASDAQ:NFLX) in comparison to its major competitors within the Entertainment industry. By analyzing critical financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of company’s performance in the industry.
Netflix Background
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 more than 300 million subscribers globally. Netflix has exposure to nearly the entire global population outside of China. The firm has traditionally avoided a regular slate of live programming or sports content, instead focusing on on-demand access to episodic television, movies, and documentaries. The firm introduced ad-supported subscription plans in 2022, giving the firm exposure to the advertising market in addition to the subscription fees that have historically accounted for nearly all its revenue.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Netflix Inc | 37.37 | 14.62 | 8.99 | 10.01% | $7.37 | $5.35 | 17.16% |
| The Walt Disney Co | 16.92 | 1.88 | 2.22 | 1.2% | $3.85 | $8.45 | -0.49% |
| Spotify Technology SA | 69.05 | 12.23 | 5.75 | 12.48% | $0.86 | $1.35 | 7.12% |
| Warner Bros. Discovery Inc | 152.03 | 1.99 | 1.90 | -0.41% | $4.28 | $4.48 | -6.01% |
| Live Nation Entertainment Inc | 105.85 | 65.06 | 1.40 | 38.94% | $0.98 | $2.06 | 11.08% |
| Tencent Music Entertainment Group | 17.50 | 2.26 | 5.95 | 2.58% | $2.72 | $3.68 | 20.64% |
| Warner Music Group Corp | 44.94 | 25.04 | 2.41 | 17.64% | $0.34 | $0.83 | 14.6% |
| TKO Group Holdings Inc | 76.19 | 4.12 | 20.07 | 1.01% | $0.31 | $0.68 | -27.31% |
| Cinemark Holdings Inc | 20.43 | 4.75 | 1.03 | 6.32% | $0.12 | $0.55 | -6.98% |
| iQIYI Inc | 204.94 | 1.04 | 0.50 | -1.85% | $0.01 | $1.22 | -7.77% |
| Imax Corp | 48.10 | 5.26 | 4.98 | 6.17% | $0.05 | $0.07 | 16.62% |
| Average | 75.59 | 12.36 | 4.62 | 8.41% | $1.35 | $2.34 | 2.15% |
Through a detailed examination of Netflix, we can deduce the following trends:
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The Price to Earnings ratio of 37.37 is 0.49x lower than the industry average, indicating potential undervaluation for the stock.
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With a Price to Book ratio of 14.62, which is 1.18x the industry average, Netflix might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.
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The Price to Sales ratio of 8.99, which is 1.95x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
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The company has a higher Return on Equity (ROE) of 10.01%, which is 1.6% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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With higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $7.37 Billion, which is 5.46x above the industry average, the company demonstrates stronger profitability and robust cash flow generation.
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With higher gross profit of $5.35 Billion, which indicates 2.29x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.
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The company’s revenue growth of 17.16% is notably higher compared to the industry average of 2.15%, showcasing exceptional sales performance and strong demand for its products or services.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is a key indicator of a company’s financial health and its reliance on debt financing.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company’s financial health and risk profile, aiding in informed decision-making.
By analyzing Netflix in relation to its top 4 peers based on the Debt-to-Equity ratio, the following insights can be derived:
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In terms of the debt-to-equity ratio, Netflix has a lower level of debt compared to its top 4 peers, indicating a stronger financial position.
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This implies that the company relies less on debt financing and has a more favorable balance between debt and equity with a lower debt-to-equity ratio of 0.56.
Key Takeaways
For Netflix, the PE ratio is low compared to peers, indicating potential undervaluation. The high PB and PS ratios suggest strong market sentiment and revenue multiples. In terms of ROE, EBITDA, gross profit, and revenue growth, Netflix demonstrates high performance relative to industry peers, reflecting strong profitability and growth potential in the Entertainment sector.
This article was generated by Benzinga’s automated content engine and reviewed by an editor.
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