Numbers analysis: Netflix (NFLX) 2021

I decided to revisit Netflix. I owned it the past and bought back a small position today. My last analysis was in December 2020.

Netflix’s primary business is a streaming video on demand service now available in almost every country worldwide except China. Netflix delivers original and third-party digital video content to PCs, Internet-connected TVs, and consumer electronic devices, including tablets, video game consoles, Apple TV, Roku, and Chromecast. In 2011, Netflix introduced DVD-only plans and separated the combined streaming and DVD plans, making it necessary for subscribers who want both to have separate plans.

Description from www.nordnet.se


The price broke out after over a year of sideways movement. Monster stocks have a tendency of going sideways for long periods before continuing up.

Charts

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Weekly chart
Daily chart

Statistics

The numbers analysis below is the first step in Rule 1 Investing by Phil Town. In his book Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! (no affiliate) he writes about his investing philosophy which centers around four key principles he refers to as the Four M’s: Meaning, Moat, Management and Margin of Safety.

The first requirement is an average annual growth rate of at least 10%, the past 10 years, in the ROIC (Return On Invested Capital), Sales, EPS (Earnings Per Share), Equity and Cash Flow. The average 5 year and 1 year growth rates should also be above 10%. High growth rates suggest a sustainable MOAT.

Next step is to analyze the the Four M’s: Meaning, Moat, Management and Margin of Safety.

The aim is to find a fantastic company, with a great track record, to invest in for at least 10 year. The expected average yearly return is at least 15%. This is used in the calculations. With an investment of 100 USD and a yearly return of 15%, 100 USD will have increased to 405 USD in 10 years time because of interest-on-interest or compound interest.

Year20112012201320142015
ROIC3.94%
Sales (MUSD)32052609437555056780
EPS (USD)0.590.040.260.620.28
Equity (MUSD)643745133418582223
Operational cash flow (MUSD)22612617152112403266799122641
P/E409

Year20162017201820192020
ROIC2.74%6.88%8.38%8.60%11.52%
Sales (MUSD)883111693157942015624996
EPS (USD)0.431.252.684.136.08
Equity (MUSD)268035825239758211065
Operational cash flow (MUSD)186678558929121124218669162761395
P/E2951541007889

ROIC and P/E are gurufocus.com. The rest are from macrotrends.com

Growth Rates

Yearly average10 year5 year1 year
ROIC8%12%
Sales Growth Rate26%39%24%
EPS Growth Rate30%116%47%
Equity Growth Rate37%49%46%
Cash Flow Growth Rate32%118%48%

Price calculations

Growth rates x 2AverageMedian P/EAverage between the high and low P/E
P/E88207154147
Calculated future price in 10 years24616468373398137459
Calculated Price61541170984959365
Margin of Safety (50%)3077585542484682

Current price: 582 USD

Fair value price range: 6154 – 11709 USD

MoS price range: 3077 – 5855 USD

To be considered for further analysis here, as a growth stock, the requirement is that the 10 year yearly average growth rate is at least 5% in all five categories. They are.

The numbers are higher than in my last post. Almost everytime I do this rule 1 calculations they are off the charts in these kind of companies with high growth rates. I don’t know what to make of it. I’m considering my position as a long term (years) hold.

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