In today’s fast-paced and highly competitive business world, it is crucial for investors and industry followers to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Netflix (NASDAQ:NFLX) in relation to its major competitors in the Entertainment industry. By closely examining key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and highlight company’s performance in the industry.
Netflix Background
Netflix’s relatively simple business model involves only one business, its streaming service. It has the 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 | 33.83 | 13.58 | 8.23 | 9.2% | $7.85 | $5.53 | 17.61% |
| The Walt Disney Co | 16.15 | 1.79 | 2.12 | 1.2% | $3.85 | $8.45 | -0.49% |
| Spotify Technology SA | 64.41 | 11.41 | 5.37 | 12.48% | $0.86 | $1.35 | 7.12% |
| Warner Bros. Discovery Inc | 147.74 | 1.93 | 1.85 | -0.41% | $4.28 | $4.48 | -6.01% |
| Live Nation Entertainment Inc | 106.38 | 65.39 | 1.41 | 38.94% | $0.98 | $2.06 | 11.08% |
| Warner Music Group Corp | 43.86 | 24.43 | 2.35 | 17.64% | $0.34 | $0.83 | 14.6% |
| TKO Group Holdings Inc | 76.03 | 4.11 | 20.02 | 1.01% | $0.31 | $0.68 | -27.31% |
| Cinemark Holdings Inc | 21.02 | 4.89 | 1.06 | 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 | 49.27 | 1.31 | 2.95 | 0.61% | $0.02 | $0.03 | 11.72% |
| Marcus Corp | 63.46 | 1.03 | 0.64 | 3.6% | $0.04 | $0.09 | -9.68% |
| Average | 63.73 | 12.16 | 4.28 | 8.76% | $1.08 | $1.86 | 1.07% |
After thoroughly examining Netflix, the following trends can be inferred:
-
With a Price to Earnings ratio of 33.83, 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.
-
It could be trading at a premium in relation to its book value, as indicated by its Price to Book ratio of 13.58 which exceeds the industry average by 1.12x.
-
The Price to Sales ratio of 8.23, which is 1.92x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
-
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.
-
The company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $7.85 Billion, which is 7.27x above the industry average, indicating stronger profitability and robust cash flow generation.
-
The company has higher gross profit of $5.53 Billion, which indicates 2.97x above the industry average, indicating stronger profitability and higher earnings from its core operations.
-
With a revenue growth of 17.61%, 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 a financial metric that helps determine the level of financial risk associated with a company’s capital structure.
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:
-
Among its top 4 peers, Netflix has a stronger financial position with a lower debt-to-equity ratio of 0.54.
-
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 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 profitability and growth potential relative to industry competitors.
This article was generated by Benzinga’s automated content engine and reviewed by an editor.
Recent Comments