Netflix has had an impressive run over the past six months as its shares have beaten the S&P 500 by 9.5%. The stock now trades at $1,211, marking a 26.2% gain. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy NFLX? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Are We Positive On NFLX?
Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.
1. Global Streaming Paid Memberships Skyrocket, Fueling Growth Opportunities
As a subscription-based app, Netflix generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.
Over the last two years, Netflix’s global streaming paid memberships, a key performance metric for the company, increased by 13.9% annually to 310.5 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its offerings have significant traction. 
2. Outstanding Long-Term EPS Growth
Analyzing the change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Netflix’s EPS grew at an astounding 27.8% compounded annual growth rate over the last three years, higher than its 10.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Netflix’s margin expanded by 19.9 percentage points over the last few years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Netflix’s free cash flow margin for the trailing 12 months was 20.4%.
Final Judgment
These are just a few reasons why Netflix ranks highly on our list, and with its shares beating the market recently, the stock trades at 34.8× forward EV/EBITDA (or $1,211 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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