In today’s rapidly changing and highly competitive business world, it is vital for investors and industry enthusiasts to carefully assess companies. In this article, we will perform a comprehensive industry comparison, evaluating Netflix (NASDAQ:NFLX) against its key competitors in the Entertainment industry. By analyzing important 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 | 33.87 | 13.60 | 8.24 | 9.2% | $7.85 | $5.53 | 17.61% |
| The Walt Disney Co | 16.25 | 1.80 | 2.13 | 1.2% | $3.85 | $8.45 | -0.49% |
| Spotify Technology SA | 64.62 | 11.44 | 5.38 | 12.48% | $0.86 | $1.35 | 7.12% |
| Warner Bros. Discovery Inc | 148.63 | 1.94 | 1.86 | -0.41% | $4.28 | $4.48 | -6.01% |
| Live Nation Entertainment Inc | 107.10 | 65.83 | 1.42 | 38.94% | $0.98 | $2.06 | 11.08% |
| TKO Group Holdings Inc | 77.67 | 4.20 | 20.46 | 1.01% | $0.31 | $0.68 | -27.31% |
| Warner Music Group Corp | 44.01 | 24.52 | 2.36 | 17.64% | $0.34 | $0.83 | 14.6% |
| Cinemark Holdings Inc | 21.51 | 5 | 1.08 | 6.32% | $0.12 | $0.55 | -6.98% |
| Imax Corp | 48.94 | 5.35 | 5.07 | 6.17% | $0.05 | $0.07 | 16.62% |
| Reservoir Media Inc | 49.67 | 1.32 | 2.98 | 0.61% | $0.02 | $0.03 | 11.72% |
| Marcus Corp | 63.29 | 1.03 | 0.63 | 3.6% | $0.04 | $0.09 | -9.68% |
| Average | 64.17 | 12.24 | 4.34 | 8.76% | $1.08 | $1.86 | 1.07% |
By thoroughly analyzing Netflix, we can discern the following trends:
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The stock’s Price to Earnings ratio of 33.87 is lower than the industry average by 0.53x, suggesting potential value in the eyes of market participants.
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The elevated Price to Book ratio of 13.6 relative to the industry average by 1.11x suggests company might be overvalued based on its book value.
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The Price to Sales ratio of 8.24, which is 1.9x 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 Return on Equity (ROE) of 9.2% is 0.44% above the industry average, highlighting efficient use of equity to generate profits.
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The company exhibits higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $7.85 Billion, which is 7.27x above the industry average, implying stronger profitability and robust cash flow generation.
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The gross profit of $5.53 Billion is 2.97x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.
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The company is experiencing remarkable revenue growth, with a rate of 17.61%, outperforming the industry average of 1.07%.
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.
In terms of the Debt-to-Equity ratio, Netflix can be assessed by comparing it to its top 4 peers, resulting in the following observations:
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Netflix has a stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.54.
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This suggests that the company has a more favorable balance between debt and equity, which can be perceived as a positive indicator by investors.
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.
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