Today we’re going to take a look at the well-established Netflix, Inc. (NASDAQ:NFLX). The company’s stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$392 and falling to the lows of US$166. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Netflix’s current trading price of US$183 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Netflix’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Netflix
What is Netflix worth?
Good news, investors! Netflix is still a bargain right now according to my price multiple model, which compares the company’s price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Netflix’s ratio of 16.23x is below its peer average of 25.16x, which indicates the stock is trading at a lower price compared to the Entertainment industry. Although, there may be another chance to buy again in the future. This is because Netflix’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Netflix look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to grow by 43% over the next couple of years, the future seems bright for Netflix. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since NFLX is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on NFLX for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy NFLX. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
If you want to dive deeper into Netflix, you’d also look into what risks it is currently facing. For example, Netflix has 3 warning signs (and 2 which are a bit concerning) we think you should know about.
If you are no longer interested in Netflix, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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