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 | 32.87 | 13.19 | 7.99 | 9.2% | $7.85 | $5.53 | 17.61% |
| The Walt Disney Co | 16.29 | 1.80 | 2.14 | 1.2% | $3.85 | $8.45 | -0.49% |
| Spotify Technology SA | 62.68 | 11.10 | 5.22 | 12.48% | $0.86 | $1.35 | 7.12% |
| Warner Bros. Discovery Inc | 145.26 | 1.90 | 1.82 | -0.41% | $4.28 | $4.48 | -6.01% |
| Live Nation Entertainment Inc | 107.09 | 65.82 | 1.42 | 38.94% | $0.98 | $2.06 | 11.08% |
| TKO Group Holdings Inc | 76.76 | 4.15 | 20.22 | 1.01% | $0.31 | $0.68 | -27.31% |
| Warner Music Group Corp | 43.28 | 24.11 | 2.32 | 17.64% | $0.34 | $0.83 | 14.6% |
| Cinemark Holdings Inc | 21.12 | 4.91 | 1.06 | 6.32% | $0.12 | $0.55 | -6.98% |
| Imax Corp | 48.41 | 5.29 | 5.01 | 6.17% | $0.05 | $0.07 | 16.62% |
| Reservoir Media Inc | 49.73 | 1.32 | 2.98 | 0.61% | $0.02 | $0.03 | 11.72% |
| Marcus Corp | 62.79 | 1.02 | 0.63 | 3.6% | $0.04 | $0.09 | -9.68% |
| Average | 63.34 | 12.14 | 4.28 | 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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With a Price to Earnings ratio of 32.87, which is 0.52x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.
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The elevated Price to Book ratio of 13.19 relative to the industry average by 1.09x suggests company might be overvalued based on its book value.
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The Price to Sales ratio of 7.99, which is 1.87x 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 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.
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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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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 indicates the proportion of debt and equity used by a company to finance its assets and operations.
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 evaluating Netflix alongside its top 4 peers in terms of the Debt-to-Equity ratio, the following insights arise:
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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 low P/E ratio suggests potential undervaluation compared to peers in the Entertainment industry. A high P/B ratio indicates the market values Netflix's assets at a premium. The high P/S ratio implies strong revenue generation relative to market capitalization. Netflix's high ROE, EBITDA, gross profit, and revenue growth reflect efficient operations and robust financial performance within the sector.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
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