Is Netflix A Good Investment Essay

PAGES
1
WORDS
326
Cite

Principles of Finance

Netflix’s income statement showcases a company with rapidly growing revenues. In FY17, the company earned revenues of $11.7 billion, and this grew to $15.8 billion in 2018 and $20.1 billion in FY19. The company was only marginally profitable in 2016, but its profits have grown to nearly $1.9 billion in FY19. Again, this is strong growth, and would be viewed quite positively by investors. Indeed, the company’s earnings per share have grown from $1.25 to $4.13 over the past three years, a strongly positive trend.

In some cases, rapid growth comes on the back of steep increases in infrastructure costs, but Netflix has also seen a sharp increase in profits, and this is reflected on the company’s balance sheet. Netflix has seen its cash position more than double in the past couple of years, and its stockholder equity has doubled, as a result of the sharp increase in the company’s profits. While Netflix has taken on more debt in order to fuel this growth, its balance sheet is quite healthy. Long term debt was $6.5 billion at the end of 2017 and was $14.7 billion two years later. However, the long term debt-to-equity ratio changed from 1.8 at the end of 2017 to 1.94 at the end of 2019, which is not a very significant increase. Thus, most of the company’s growth has been fueled by its internal profitability, and the company is simply keeping its debt to equity ratio around the same level.

Overall, a stockholder would have to view the changes in Netflix’s financials positively. The company is growing rapidly, and this is reflected well on the income statement. While its debt is increasing, its equity is increasing almost as quickly. Combined with a steep increase in earnings per share, Netflix looks like a good company in which to hold stock, in particular if the price is good at the present time.

References

Netflix 2019 Annual Report:  http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_NFLX_2019.pdf

Netflix 2018 Annual Report:  https://s22.q4cdn.com/959853165/files/doc_financials/annual_reports/2018/Form-10K_Q418_Filed.pdf

Cite this Document:

"Is Netflix A Good Investment" (2020, February 28) Retrieved June 14, 2024, from
https://www.paperdue.com/essay/is-netflix-a-good-investment-essay-2174951

"Is Netflix A Good Investment" 28 February 2020. Web.14 June. 2024. <
https://www.paperdue.com/essay/is-netflix-a-good-investment-essay-2174951>

"Is Netflix A Good Investment", 28 February 2020, Accessed.14 June. 2024,
https://www.paperdue.com/essay/is-netflix-a-good-investment-essay-2174951

Related Documents

This pricing power can be applied to reducing the prices for consumers as a means of gaining market share. At this point in its life cycle, Netflix should have a cost advantage over its primary competitor, Blockbuster, in the video rental business, given its size. When Netflix started, this was not the case, but Blockbuster failed to leverage its pricing power to undercut Netflix, and the latter firm eventually

Netflix is one of the most innovative companies of 2014. They are an internet TV business. They provide online streaming content, including DVD/Blu Ray rentals shipped directly to the home of subscribers. The company's CEO is Reed Hastings. Netflix's main headquarters remain in Los Gatos, California. It boasts 2,022 employees towards the end of 2013. A brief background reveals Netflix.com was founded on 1997 and its mission statement at the

Netflix Company Analysis
PAGES 10 WORDS 2893

Organizational Context Netflix is an entertainment company based in the United States that specializes on online on-demand streaming video, in addition to a DVD-by-mail service in America. The organization was founded in Scotts Valley in 1997 and two years later began its prevailing consumer subscription model. In the present day, Netflix’s consumer base comprises of more than 117 million subscribers in 190 nations across the world. Netflix are a forerunner in

This indicates that the company's business model is starting to resonate with consumers. It is too early, however, to determine if Netflix is going to achieve its objectives. Achieving its goals will probably take a decade or more, and there will be many critical strategic decisions between here and there. Thus, while Netflix has had success to date, it is difficult to assess at the time of the IPO

Prompt Taking into consideration that Netflix is not a manufacturing entity, there cannot be a prospect for a new facility. The hypothetical new investment project for Netflix is a cost-cutting investment. Notably, the corporation can make an investment in the production of new Netflix original content, such as TV shows, movies and documentaries. Content is exceedingly the largest spending priority for Netflix, with the corporation increasing its spending from $6 billion

Accounting Netflix
PAGES 2 WORDS 668

Accounting The trend in Netflix's contribution margin ratio over the past three years is as follows. The costs are the COGS plus 30% of other expenses. The remaining 70% of expenses are assumed to be fixed. Netflix Revenue Costs Contribution Contribution Margin The contribution margin for Netflix is therefore lower than it was a couple of years ago. The long-term trend is tough to determine, but it seems that Netflix saw its contribution margin take a hit