Sue DentRhodes Bill Garlick About Netflix 1997 Netflix founded 2002 Initial public offering 2007 Introduced streaming 2013 Netflix original series House of Cards ID: 731815
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Slide1
Netflix Analysis
Sheila Everts
Sue Dent-Rhodes
Bill GarlickSlide2
About Netflix
1997
– Netflix founded
2002 – Initial public offering2007 – Introduced streaming2013 – Netflix original series House of Cards, Orange is the New Black, The Square
Netflix. (n.d.)Slide3
Ratios
Ratio
2015
2014
Gross margin
32.3%
31.8%
Debt-to-equity ratio
3.592.79Current ratio1.541.47Quick ratio1.541.47Days sales outstanding0.000.00Days payable outstanding19.8819.34Return on Assets1.2%3.8%
Berman, K., Knight, J., & Case, J. (
2013); Netflix
.
(2016)Slide4
The Investor Perspective
The “Big Five”
Revenue Growth from one year to the next
Earnings per (EPS)Earnings before interest, taxes, depreciation, and amortization (EBITDA)Free Cash Flow (FCF)Return on Total Capital (ROTC), or Return on Equity (ROE)Berman, K., Knight, J., & Case, J. (2013)Slide5
Revenue Growth from one year to the next – According to Stanton (2016) Netflix may need to accept ads to increase revenue. Because of the monthly fee is at the top of the services worth. Based on the research Netflix users may pay more then $10 a month to keep the service ad free. Although Netflix has original series or
movies
this has increased revenues.
Earnings per (EPS) is the net income for the quarter divided by the average number of shares, investors expect this number to increase over time Berman, K., Knight, J., & Case, J. (2013). The EPS is currently $95.44 Nasdaq (2016).Netflix (n.d.) Slide6
Earnings before interest, taxes, depreciation, and amortization (EBITDA) To calculate EBITDA begin with net earnings then add, interest, taxes, depreciation, and amortization. Netflix has increased EBITDA for the passed three years.
Free Cash Flow (
FCF
) when this ratio is low it may mean the company is trying to make EBITDA strong it is known as a accounting gimmick Berman, K., Knight, J., & Case, J. (2013).Return on Total Capital (ROTC), or Return on Equity (ROE) is used by investors to determine if it is worth putting their money with this company, they’re looking to see a profit of the investment. As of December 2015 the ROE was 5.94% Netflix (n.d.).Nasdaq (2016)Slide7
NETFLIX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
ROA ( return on assets / mixed ratio) 2014 ROA 2.43%
Growth
Off balance is due to future costs of revenue in 2015
The strength comes from financial viability
Creativeness towards future
Competiveness with Hulu, HBO, and AmazonNetflix. (2016)Slide8
NETFLIX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Netflix cash flow burn increasedGross profit margin, unsustainable + operational margin decreasedSubscriptions increasedFlow has steadily decreased while the debt has increased.More $ to acquire business opportunities, paying debit, repurchasing stock and paying dividends
2014 over $1 billion invested in licensed streaming limited cash & cash equivalent
Netflix
.
(2016)Slide9
References
Berman, K., Knight, J., & Case, J. (2013).
Financial intelligence: A manager's guide to knowing what the numbers really mean.
Boston, MA: Harvard Business Review Press.Nasdaq. (2016, June 17). NFLX company financials - financial ratios. Retrieved from Nasdaq: http://www.nasdaq.com/symbol/nflx/financials?query=ratiosNetflix. (n.d.). About Netflix. Retrieved from Netflix: https://media.netflix.com/en/about-netflixNetflix, Inc. (2016). Form 10-K 2016. Retrieved from SEC EDGAR website https://www.sec.gov/Archives/edgar/data/1065280/000106528016000047/nflx201510k.htm"Netflix, Inc. (NFLX) Earnings Per Share." NASDAQ.com. N.p.,
n.d. Web. 16 June 2016.Stanton, D. (2016, January 6). To raise new revenue, Netflix and Amazon Prime might need to accept ads
. Retrieved from GTK: https://www.gfk.com/pt-br/insights/press-release/to-raise-new-revenue-netflix-and-amazon-prime-might-need-to-accept-ads
/