In the fast-paced and highly competitive business world of today, conducting thorough company analysis is essential for investors and industry observers. In this article, we will conduct an extensive industry comparison, evaluating Netflix (NASDAQ:NFLX) in relation to its major competitors in the Entertainment industry. Through a detailed examination of key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and illuminate 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 | 33.45 | 13.43 | 8.14 | 9.2% | $7.85 | $5.53 | 17.61% |
| The Walt Disney Co | 15.99 | 1.77 | 2.10 | 1.2% | $3.85 | $8.45 | -0.49% |
| Spotify Technology SA | 63.28 | 11.20 | 5.27 | 12.48% | $0.86 | $1.35 | 7.12% |
| Warner Bros. Discovery Inc | 147.26 | 1.93 | 1.84 | -0.41% | $4.28 | $4.48 | -6.01% |
| Live Nation Entertainment Inc | 106.91 | 65.71 | 1.41 | 38.94% | $0.98 | $2.06 | 11.08% |
| Warner Music Group Corp | 43.25 | 24.09 | 2.32 | 17.64% | $0.34 | $0.83 | 14.6% |
| TKO Group Holdings Inc | 74.38 | 4.03 | 19.59 | 1.01% | $0.31 | $0.68 | -27.31% |
| Cinemark Holdings Inc | 21.38 | 4.97 | 1.08 | 6.32% | $0.12 | $0.55 | -6.98% |
| Imax Corp | 48.61 | 5.31 | 5.03 | 6.17% | $0.05 | $0.07 | 16.62% |
| Reservoir Media Inc | 48.93 | 1.30 | 2.93 | 0.61% | $0.02 | $0.03 | 11.72% |
| Marcus Corp | 62 | 1.01 | 0.62 | 3.6% | $0.04 | $0.09 | -9.68% |
| Average | 63.2 | 12.13 | 4.22 | 8.76% | $1.08 | $1.86 | 1.07% |
By conducting an in-depth analysis of Netflix, we can identify the following trends:
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At 33.45, the stock’s Price to Earnings ratio is 0.53x less than the industry average, suggesting favorable growth potential.
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With a Price to Book ratio of 13.43, which is 1.11x 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 stock’s relatively high Price to Sales ratio of 8.14, surpassing the industry average by 1.93x, may indicate an aspect of overvaluation in terms of sales performance.
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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 Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $7.85 Billion is 7.27x above the industry average, highlighting stronger profitability and robust cash flow generation.
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Compared to its industry, 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.
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The company’s revenue growth of 17.61% is notably higher compared to the industry average of 1.07%, showcasing exceptional sales performance and strong demand for its products or services.
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.
When assessing Netflix against its top 4 peers using the Debt-to-Equity ratio, the following comparisons can be made:
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Compared to its top 4 peers, Netflix has a stronger financial position indicated by its lower debt-to-equity ratio of 0.54.
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This suggests that the company relies less on debt financing and has a more favorable balance between debt and equity, which can be seen as a positive attribute 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 outperforms industry peers, reflecting strong financial performance 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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