In the fast-paced and cutthroat world of business, conducting thorough company analysis is essential for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Netflix (NASDAQ:NFLX) in comparison to its major competitors within the Entertainment industry. By analyzing crucial 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 | 33.74 | 13.60 | 8.21 | 9.2% | $7.37 | $5.35 | 4.7% |
| The Walt Disney Co | 16.52 | 1.84 | 2.17 | 1.2% | $3.85 | $8.45 | -0.49% |
| Spotify Technology SA | 64.01 | 11.33 | 5.33 | 12.48% | $0.86 | $1.35 | 7.12% |
| Warner Bros. Discovery Inc | 150.16 | 1.96 | 1.88 | -0.41% | $4.28 | $4.48 | -6.01% |
| Live Nation Entertainment Inc | 101.24 | 62.23 | 1.34 | 38.94% | $0.98 | $2.06 | 11.08% |
| Tencent Music Entertainment Group | 16.13 | 2.08 | 5.49 | 2.58% | $2.72 | $3.68 | 20.64% |
| TKO Group Holdings Inc | 78.02 | 4.22 | 20.55 | 1.01% | $0.31 | $0.68 | -27.31% |
| Warner Music Group Corp | 43.33 | 24.14 | 2.32 | 17.64% | $0.34 | $0.83 | 14.6% |
| Cinemark Holdings Inc | 21.98 | 5.11 | 1.11 | 6.32% | $0.12 | $0.55 | -6.98% |
| Imax Corp | 51.62 | 5.64 | 5.34 | 6.17% | $0.05 | $0.07 | 16.62% |
| iQIYI Inc | 199.92 | 1.01 | 0.49 | -1.85% | $0.01 | $1.22 | -7.77% |
| Marcus Corp | 66.29 | 1.08 | 0.66 | 3.6% | $0.04 | $0.09 | -9.68% |
| Reservoir Media Inc | 50.07 | 1.33 | 3 | 0.61% | $0.02 | $0.03 | 11.72% |
| Average | 71.61 | 10.16 | 4.14 | 7.36% | $1.13 | $1.96 | 1.96% |
Through a detailed examination of Netflix, we can deduce the following trends:
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A Price to Earnings ratio of 33.74 significantly below the industry average by 0.47x suggests undervaluation. This can make the stock appealing for those seeking growth.
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It could be trading at a premium in relation to its book value, as indicated by its Price to Book ratio of 13.6 which exceeds the industry average by 1.34x.
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With a relatively high Price to Sales ratio of 8.21, which is 1.98x the industry average, the stock might be considered overvalued based on sales performance.
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With a Return on Equity (ROE) of 9.2% that is 1.84% above the industry average, it appears that the company exhibits efficient use of equity to generate profits.
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With higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $7.37 Billion, which is 6.52x above the industry average, the company demonstrates stronger profitability and robust cash flow generation.
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Compared to its industry, the company has higher gross profit of $5.35 Billion, which indicates 2.73x above the industry average, indicating stronger profitability and higher earnings from its core operations.
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The company’s revenue growth of 4.7% exceeds the industry average of 1.96%, indicating strong sales performance and market outperformance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio gauges the extent to which a company has financed its operations through debt relative to equity.
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 considering the Debt-to-Equity ratio, Netflix can be compared to its top 4 peers, leading to the following observations:
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Among its top 4 peers, Netflix has a stronger financial position with a lower debt-to-equity ratio of 0.54.
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This indicates that the company relies less on debt financing and maintains a more favorable balance between debt and equity, which can be viewed positively by investors.
Key Takeaways
For Netflix, the low P/E ratio suggests potential undervaluation compared to peers in the Entertainment industry. A high P/B ratio indicates the market values Netflix’s assets at a premium. The high P/S ratio implies strong revenue generation relative to market capitalization. Netflix’s high ROE, EBITDA, gross profit, and revenue growth reflect efficient operations and robust financial performance within the sector.
This article was generated by Benzinga’s automated content engine and reviewed by an editor.
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