NASDAQ:NFLX is not too expensive for the growth it is showing.

Take a closer look at NETFLIX INC (NASDAQ:NFLX), an affordable growth stock uncovered by our stock screener. NASDAQ:NFLX boasts strong growth prospects and excels in financial health indicators, all while maintaining a reasonable valuation. Let's break it down further.

What does the Growth looks like for NASDAQ:NFLX

Every stock receives a Growth Rating from ChartMill, ranging from 0 to 10. This rating assesses various growth aspects, including historical and projected EPS and revenue growth. NASDAQ:NFLX boasts a 7 out of 10:

• NFLX shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 20.70%, which is quite impressive.
• The Earnings Per Share has been growing by 34.98% on average over the past years. This is a very strong growth
• Measured over the past years, NFLX shows a quite strong growth in Revenue. The Revenue has been growing by 16.38% on average per year.
• The Earnings Per Share is expected to grow by 22.73% on average over the next years. This is a very strong growth
• NFLX is expected to show quite a strong growth in Revenue. In the coming years, the Revenue will grow by 10.31% yearly.

ChartMill's Evaluation of Valuation

ChartMill assigns a proprietary Valuation Rating to each stock. The score is computed by evaluating various valuation aspects, like price to earnings and free cash flow, both absolutely as relative to the market and industry. NASDAQ:NFLX was assigned a score of 5 for valuation:

• Based on the Price/Earnings ratio, NFLX is valued a bit cheaper than the industry average as 71.43% of the companies are valued more expensively.
• NFLX's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. NFLX is cheaper than 74.03% of the companies in the same industry.
• 76.62% of the companies in the same industry are more expensive than NFLX, based on the Enterprise Value to EBITDA ratio.
• NFLX's Price/Free Cash Flow ratio is a bit cheaper when compared to the industry. NFLX is cheaper than 72.73% of the companies in the same industry.
• The excellent profitability rating of NFLX may justify a higher PE ratio.
• A more expensive valuation may be justified as NFLX's earnings are expected to grow with 28.50% in the coming years.

Exploring NASDAQ:NFLX's Health

ChartMill employs its own Health Rating for stock assessment. This rating, ranging from 0 to 10, is calculated by examining various liquidity and solvency ratios. In the case of NASDAQ:NFLX, the assigned 8 reflects its health status:

• An Altman-Z score of 7.50 indicates that NFLX is not in any danger for bankruptcy at the moment.
• NFLX's Altman-Z score of 7.50 is amongst the best of the industry. NFLX outperforms 94.81% of its industry peers.
• The Debt to FCF ratio of NFLX is 2.10, which is a good value as it means it would take NFLX, 2.10 years of fcf income to pay off all of its debts.
• Looking at the Debt to FCF ratio, with a value of 2.10, NFLX belongs to the top of the industry, outperforming 88.31% of the companies in the same industry.
• Although NFLX does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
• NFLX does not score too well on the current and quick ratio evaluation. However, as it has excellent solvency and profitability, these ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

Evaluating Profitability: NASDAQ:NFLX

ChartMill assigns a proprietary Profitability Rating to each stock. The score is computed by evaluating various profitability ratios and margins and ranges from 0 to 10. NASDAQ:NFLX was assigned a score of 8 for profitability:

• NFLX has a Return On Assets of 11.10%. This is amongst the best in the industry. NFLX outperforms 93.51% of its industry peers.
• NFLX's Return On Equity of 26.27% is amongst the best of the industry. NFLX outperforms 93.51% of its industry peers.
• Looking at the Return On Invested Capital, with a value of 14.43%, NFLX belongs to the top of the industry, outperforming 93.51% of the companies in the same industry.
• The 3 year average ROIC (13.36%) for NFLX is below the current ROIC(14.43%), indicating increased profibility in the last year.
• The Profit Margin of NFLX (16.04%) is better than 90.91% of its industry peers.
• NFLX's Profit Margin has improved in the last couple of years.
• NFLX has a better Operating Margin (20.62%) than 92.21% of its industry peers.
• NFLX's Operating Margin has improved in the last couple of years.
• NFLX's Gross Margin has improved in the last couple of years.

Every day, new Affordable Growth stocks can be found on ChartMill in our Affordable Growth screener.

Our latest full fundamental report of NFLX contains the most current fundamental analsysis.

Disclaimer

This article should in no way be interpreted as advice in any way. The article is based on the observed metrics at the time of writing, but you should always make your own analysis and trade or invest at your own responsibility.