In today’s rapidly changing and fiercely competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies. In this article, we will conduct a comprehensive industry comparison, evaluating Netflix (NASDAQ:NFLX) against its key competitors in the Entertainment industry. By examining key financial metrics, market position, and growth prospects, we aim to provide valuable insights for investors and shed light on company’s performance within 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 | 34.04 | 13.73 | 8.28 | 9.2% | $7.37 | $5.35 | 4.7% |
| The Walt Disney Co | 16.20 | 1.79 | 2.13 | 1.2% | $3.85 | $8.45 | -0.49% |
| Spotify Technology SA | 65.27 | 11.56 | 5.44 | 12.48% | $0.86 | $1.35 | 7.12% |
| Warner Bros. Discovery Inc | 150.42 | 1.97 | 1.88 | -0.41% | $4.28 | $4.48 | -6.01% |
| Live Nation Entertainment Inc | 106.50 | 65.46 | 1.41 | 38.94% | $0.98 | $2.06 | 11.08% |
| TKO Group Holdings Inc | 78.21 | 4.23 | 20.60 | 1.01% | $0.31 | $0.68 | -27.31% |
| Warner Music Group Corp | 43.94 | 24.48 | 2.35 | 17.64% | $0.34 | $0.83 | 14.6% |
| Cinemark Holdings Inc | 21.83 | 5.07 | 1.10 | 6.32% | $0.12 | $0.55 | -6.98% |
| Imax Corp | 48.75 | 5.33 | 5.05 | 6.17% | $0.05 | $0.07 | 16.62% |
| Marcus Corp | 65 | 1.05 | 0.65 | 3.6% | $0.04 | $0.09 | -9.68% |
| Reservoir Media Inc | 49.53 | 1.31 | 2.97 | 0.61% | $0.02 | $0.03 | 11.72% |
| Average | 64.56 | 12.22 | 4.36 | 8.76% | $1.08 | $1.86 | 1.07% |
By closely examining Netflix, we can identify the following trends:
-
With a Price to Earnings ratio of 34.04, which is 0.53x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.
-
With a Price to Book ratio of 13.73, which is 1.12x 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.
-
The stock’s relatively high Price to Sales ratio of 8.28, surpassing the industry average by 1.9x, may indicate an aspect of overvaluation in terms of sales performance.
-
The company has a higher Return on Equity (ROE) of 9.2%, which is 0.44% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
-
Compared to its industry, the company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $7.37 Billion, which is 6.82x above the industry average, indicating stronger profitability and robust cash flow generation.
-
The gross profit of $5.35 Billion is 2.88x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.
-
With a revenue growth of 4.7%, which surpasses the industry average of 1.07%, the company is demonstrating robust sales expansion and gaining market share.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is an important measure to assess the financial structure and risk profile of a company.
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.
When comparing Netflix with its top 4 peers based on the Debt-to-Equity ratio, the following insights can be observed:
-
Netflix is in a relatively stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.54.
-
This implies that the company relies less on debt financing and has a more favorable balance between debt and equity.
Key Takeaways
For Netflix, the PE ratio is low compared to peers, indicating potential undervaluation. The PB and PS ratios are high, suggesting overvaluation relative to industry standards. In terms of ROE, EBITDA, gross profit, and revenue growth, Netflix demonstrates strong performance compared to its competitors in the Entertainment sector.
This article was generated by Benzinga’s automated content engine and reviewed by an editor.
Recent Comments