Intrinsic value of Netflix - NFLX

Previous Close

$193.20

  Intrinsic Value

$103.69

stock screener

  Rating & Target

sell

-46%

Previous close

$193.20

 
Intrinsic value

$103.69

 
Up/down potential

-46%

 
Rating

sell

We calculate the intrinsic value of NFLX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 83.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  30.25
  30.30
  27.77
  25.49
  23.44
  21.60
  19.94
  18.45
  17.10
  15.89
  14.80
  13.82
  12.94
  12.15
  11.43
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.63
  6.47
  6.32
  6.19
Revenue, $m
  8,831
  11,507
  14,702
  18,450
  22,776
  27,695
  33,217
  39,344
  46,073
  53,394
  61,297
  69,769
  78,797
  88,368
  98,469
  109,091
  120,229
  131,876
  144,035
  156,706
  169,897
  183,618
  197,881
  212,706
  228,111
  244,120
  260,759
  278,060
  296,054
  314,776
  334,266
Variable operating expenses, $m
 
  10,989
  14,041
  17,620
  21,751
  26,449
  31,723
  37,574
  43,999
  50,991
  58,539
  66,630
  75,251
  84,391
  94,038
  104,182
  114,818
  125,942
  137,553
  149,654
  162,251
  175,355
  188,977
  203,134
  217,846
  233,134
  249,025
  265,547
  282,731
  300,611
  319,224
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  8,451
  10,989
  14,041
  17,620
  21,751
  26,449
  31,723
  37,574
  43,999
  50,991
  58,539
  66,630
  75,251
  84,391
  94,038
  104,182
  114,818
  125,942
  137,553
  149,654
  162,251
  175,355
  188,977
  203,134
  217,846
  233,134
  249,025
  265,547
  282,731
  300,611
  319,224
Operating income, $m
  380
  518
  662
  830
  1,025
  1,246
  1,495
  1,770
  2,073
  2,403
  2,758
  3,140
  3,546
  3,977
  4,431
  4,909
  5,410
  5,934
  6,482
  7,052
  7,645
  8,263
  8,905
  9,572
  10,265
  10,985
  11,734
  12,513
  13,322
  14,165
  15,042
EBITDA, $m
  5,305
  2,083
  2,661
  3,339
  4,122
  5,013
  6,012
  7,121
  8,339
  9,664
  11,095
  12,628
  14,262
  15,995
  17,823
  19,746
  21,761
  23,870
  26,070
  28,364
  30,751
  33,235
  35,817
  38,500
  41,288
  44,186
  47,197
  50,329
  53,586
  56,975
  60,502
Interest expense (income), $m
  139
  163
  307
  492
  709
  960
  1,245
  1,566
  1,921
  2,311
  2,736
  3,194
  3,685
  4,209
  4,764
  5,349
  5,965
  6,611
  7,286
  7,991
  8,726
  9,491
  10,287
  11,114
  11,973
  12,867
  13,795
  14,760
  15,763
  16,807
  17,892
Earnings before tax, $m
  261
  355
  355
  338
  316
  286
  249
  205
  152
  92
  23
  -54
  -139
  -232
  -332
  -440
  -555
  -677
  -805
  -940
  -1,081
  -1,228
  -1,382
  -1,542
  -1,708
  -1,881
  -2,061
  -2,247
  -2,441
  -2,642
  -2,850
Tax expense, $m
  74
  96
  96
  91
  85
  77
  67
  55
  41
  25
  6
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  187
  259
  259
  247
  230
  209
  182
  150
  111
  67
  17
  -54
  -139
  -232
  -332
  -440
  -555
  -677
  -805
  -940
  -1,081
  -1,228
  -1,382
  -1,542
  -1,708
  -1,881
  -2,061
  -2,247
  -2,441
  -2,642
  -2,850

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,734
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  13,587
  15,445
  19,735
  24,765
  30,571
  37,175
  44,587
  52,811
  61,843
  71,670
  82,278
  93,650
  105,768
  118,614
  132,173
  146,431
  161,381
  177,015
  193,335
  210,343
  228,049
  246,466
  265,613
  285,511
  306,189
  327,677
  350,013
  373,235
  397,388
  422,519
  448,680
Adjusted assets (=assets-cash), $m
  11,853
  15,445
  19,735
  24,765
  30,571
  37,175
  44,587
  52,811
  61,843
  71,670
  82,278
  93,650
  105,768
  118,614
  132,173
  146,431
  161,381
  177,015
  193,335
  210,343
  228,049
  246,466
  265,613
  285,511
  306,189
  327,677
  350,013
  373,235
  397,388
  422,519
  448,680
Revenue / Adjusted assets
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
  0.745
Average production assets, $m
  6,007
  7,825
  9,998
  12,546
  15,487
  18,833
  22,588
  26,754
  31,329
  36,308
  41,682
  47,443
  53,582
  60,090
  66,959
  74,182
  81,755
  89,676
  97,944
  106,560
  115,530
  124,860
  134,559
  144,640
  155,115
  166,001
  177,316
  189,081
  201,317
  214,048
  227,301
Working capital, $m
  1,133
  -782
  -1,000
  -1,255
  -1,549
  -1,883
  -2,259
  -2,675
  -3,133
  -3,631
  -4,168
  -4,744
  -5,358
  -6,009
  -6,696
  -7,418
  -8,176
  -8,968
  -9,794
  -10,656
  -11,553
  -12,486
  -13,456
  -14,464
  -15,512
  -16,600
  -17,732
  -18,908
  -20,132
  -21,405
  -22,730
Total debt, $m
  3,394
  6,388
  10,248
  14,776
  20,001
  25,944
  32,615
  40,017
  48,145
  56,990
  66,537
  76,772
  87,678
  99,240
  111,443
  124,275
  137,730
  151,801
  166,489
  181,796
  197,732
  214,307
  231,538
  249,447
  268,057
  287,397
  307,498
  328,398
  350,136
  372,754
  396,299
Total liabilities, $m
  10,907
  13,901
  17,761
  22,289
  27,514
  33,457
  40,128
  47,530
  55,658
  64,503
  74,050
  84,285
  95,191
  106,753
  118,956
  131,788
  145,243
  159,314
  174,002
  189,309
  205,245
  221,820
  239,051
  256,960
  275,570
  294,910
  315,011
  335,911
  357,649
  380,267
  403,812
Total equity, $m
  2,680
  1,545
  1,973
  2,477
  3,057
  3,717
  4,459
  5,281
  6,184
  7,167
  8,228
  9,365
  10,577
  11,861
  13,217
  14,643
  16,138
  17,702
  19,334
  21,034
  22,805
  24,647
  26,561
  28,551
  30,619
  32,768
  35,001
  37,323
  39,739
  42,252
  44,868
Total liabilities and equity, $m
  13,587
  15,446
  19,734
  24,766
  30,571
  37,174
  44,587
  52,811
  61,842
  71,670
  82,278
  93,650
  105,768
  118,614
  132,173
  146,431
  161,381
  177,016
  193,336
  210,343
  228,050
  246,467
  265,612
  285,511
  306,189
  327,678
  350,012
  373,234
  397,388
  422,519
  448,680
Debt-to-equity ratio
  1.266
  4.140
  5.190
  5.970
  6.540
  6.980
  7.310
  7.580
  7.790
  7.950
  8.090
  8.200
  8.290
  8.370
  8.430
  8.490
  8.530
  8.580
  8.610
  8.640
  8.670
  8.700
  8.720
  8.740
  8.750
  8.770
  8.790
  8.800
  8.810
  8.820
  8.830
Adjusted equity ratio
  0.080
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  187
  259
  259
  247
  230
  209
  182
  150
  111
  67
  17
  -54
  -139
  -232
  -332
  -440
  -555
  -677
  -805
  -940
  -1,081
  -1,228
  -1,382
  -1,542
  -1,708
  -1,881
  -2,061
  -2,247
  -2,441
  -2,642
  -2,850
Depreciation, amort., depletion, $m
  4,925
  1,565
  2,000
  2,509
  3,097
  3,767
  4,518
  5,351
  6,266
  7,262
  8,336
  9,489
  10,716
  12,018
  13,392
  14,836
  16,351
  17,935
  19,589
  21,312
  23,106
  24,972
  26,912
  28,928
  31,023
  33,200
  35,463
  37,816
  40,263
  42,810
  45,460
Funds from operations, $m
  -8,162
  1,824
  2,259
  2,756
  3,328
  3,975
  4,700
  5,500
  6,377
  7,329
  8,353
  9,434
  10,577
  11,786
  13,059
  14,396
  15,796
  17,259
  18,784
  20,372
  22,025
  23,744
  25,530
  27,386
  29,315
  31,319
  33,402
  35,569
  37,823
  40,168
  42,610
Change in working capital, $m
  -6,688
  -182
  -217
  -255
  -294
  -335
  -376
  -417
  -458
  -498
  -537
  -576
  -614
  -651
  -687
  -722
  -757
  -792
  -827
  -862
  -897
  -933
  -970
  -1,008
  -1,048
  -1,089
  -1,132
  -1,176
  -1,224
  -1,273
  -1,325
Cash from operations, $m
  -1,474
  2,006
  2,476
  3,011
  3,622
  4,310
  5,075
  5,917
  6,835
  7,826
  8,891
  10,011
  11,191
  12,437
  13,746
  15,119
  16,553
  18,051
  19,611
  21,234
  22,922
  24,677
  26,500
  28,394
  30,362
  32,408
  34,534
  36,745
  39,046
  41,441
  43,935
Maintenance CAPEX, $m
  0
  -1,201
  -1,565
  -2,000
  -2,509
  -3,097
  -3,767
  -4,518
  -5,351
  -6,266
  -7,262
  -8,336
  -9,489
  -10,716
  -12,018
  -13,392
  -14,836
  -16,351
  -17,935
  -19,589
  -21,312
  -23,106
  -24,972
  -26,912
  -28,928
  -31,023
  -33,200
  -35,463
  -37,816
  -40,263
  -42,810
New CAPEX, $m
  -185
  -1,818
  -2,173
  -2,549
  -2,941
  -3,345
  -3,755
  -4,166
  -4,575
  -4,979
  -5,374
  -5,761
  -6,139
  -6,508
  -6,869
  -7,223
  -7,573
  -7,921
  -8,268
  -8,616
  -8,970
  -9,330
  -9,699
  -10,080
  -10,475
  -10,886
  -11,315
  -11,764
  -12,236
  -12,731
  -13,253
Cash from investing activities, $m
  50
  -3,019
  -3,738
  -4,549
  -5,450
  -6,442
  -7,522
  -8,684
  -9,926
  -11,245
  -12,636
  -14,097
  -15,628
  -17,224
  -18,887
  -20,615
  -22,409
  -24,272
  -26,203
  -28,205
  -30,282
  -32,436
  -34,671
  -36,992
  -39,403
  -41,909
  -44,515
  -47,227
  -50,052
  -52,994
  -56,063
Free cash flow, $m
  -1,424
  -1,013
  -1,262
  -1,537
  -1,828
  -2,133
  -2,446
  -2,767
  -3,091
  -3,418
  -3,745
  -4,087
  -4,436
  -4,787
  -5,141
  -5,497
  -5,856
  -6,221
  -6,592
  -6,971
  -7,360
  -7,759
  -8,172
  -8,598
  -9,041
  -9,502
  -9,981
  -10,482
  -11,006
  -11,554
  -12,127
Issuance/(repayment) of debt, $m
  1,000
  2,994
  3,860
  4,528
  5,225
  5,943
  6,671
  7,402
  8,128
  8,845
  9,548
  10,235
  10,906
  11,561
  12,203
  12,833
  13,454
  14,071
  14,688
  15,308
  15,935
  16,575
  17,232
  17,908
  18,610
  19,340
  20,102
  20,900
  21,737
  22,618
  23,545
Issuance/(repurchase) of shares, $m
  37
  339
  170
  256
  350
  451
  559
  673
  792
  916
  1,044
  1,191
  1,351
  1,517
  1,688
  1,866
  2,050
  2,240
  2,437
  2,641
  2,851
  3,070
  3,297
  3,532
  3,776
  4,030
  4,294
  4,569
  4,856
  5,155
  5,466
Cash from financing (excl. dividends), $m  
  1,092
  3,333
  4,030
  4,784
  5,575
  6,394
  7,230
  8,075
  8,920
  9,761
  10,592
  11,426
  12,257
  13,078
  13,891
  14,699
  15,504
  16,311
  17,125
  17,949
  18,786
  19,645
  20,529
  21,440
  22,386
  23,370
  24,396
  25,469
  26,593
  27,773
  29,011
Total cash flow (excl. dividends), $m
  -342
  2,320
  2,768
  3,247
  3,747
  4,262
  4,784
  5,308
  5,829
  6,342
  6,846
  7,339
  7,821
  8,291
  8,751
  9,202
  9,648
  10,090
  10,532
  10,977
  11,427
  11,886
  12,357
  12,842
  13,345
  13,868
  14,415
  14,987
  15,588
  16,219
  16,884
Retained Cash Flow (-), $m
  -457
  -599
  -429
  -503
  -581
  -660
  -741
  -822
  -903
  -983
  -1,061
  -1,191
  -1,351
  -1,517
  -1,688
  -1,866
  -2,050
  -2,240
  -2,437
  -2,641
  -2,851
  -3,070
  -3,297
  -3,532
  -3,776
  -4,030
  -4,294
  -4,569
  -4,856
  -5,155
  -5,466
Prev. year cash balance distribution, $m
 
  1,734
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,455
  2,339
  2,744
  3,166
  3,601
  4,043
  4,485
  4,925
  5,360
  5,786
  6,148
  6,470
  6,774
  7,062
  7,336
  7,598
  7,850
  8,096
  8,336
  8,576
  8,816
  9,060
  9,310
  9,569
  9,838
  10,120
  10,418
  10,732
  11,064
  11,417
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  3,313
  2,141
  2,388
  2,607
  2,791
  2,934
  3,030
  3,079
  3,079
  3,033
  2,920
  2,761
  2,576
  2,371
  2,154
  1,931
  1,708
  1,491
  1,284
  1,090
  912
  752
  610
  487
  383
  295
  224
  166
  121
  86
Current shareholders' claim on cash, %
  100
  96.5
  95.5
  94.3
  92.9
  91.6
  90.2
  88.9
  87.6
  86.3
  85.1
  83.9
  82.7
  81.5
  80.3
  79.2
  78.1
  77.1
  76.0
  75.0
  74.0
  73.0
  72.0
  71.1
  70.2
  69.3
  68.4
  67.5
  66.6
  65.8
  64.9

Netflix, Inc. is a provider an Internet television network. The Company operates through three segments: Domestic streaming, International streaming and Domestic DVD. The Domestic streaming segment includes services that streams content to its members in the United States. The International streaming segment includes services that streams content to its members outside the United States. The Domestic DVD segment includes services, such as digital optical disc (DVD)-by-mail. The Company's members can watch original series, documentaries, feature films, as well as television shows and movies directly on their Internet-connected screen, televisions, computers and mobile devices. It offers its streaming services both domestically and internationally. In the United States, its members can receive DVDs delivered to their homes. The Company had members streaming in over 190 countries, as of December 31, 2016.

FINANCIAL RATIOS  of  Netflix (NFLX)

Valuation Ratios
P/E Ratio 444.3
Price to Sales 9.4
Price to Book 31
Price to Tangible Book
Price to Cash Flow -56.4
Price to Free Cash Flow -50.1
Growth Rates
Sales Growth Rate 30.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.5%
Cap. Spend. - 3 Yr. Gr. Rate 9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.9
LT Debt to Equity 126.6%
Total Debt to Equity 126.6%
Interest Coverage 3
Management Effectiveness
Return On Assets 2.4%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. 6.1%
Return On Equity 7.6%
Return On Equity - 3 Yr. Avg. 10.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 31.7%
Gross Margin - 3 Yr. Avg. 31.9%
EBITDA Margin 60.3%
EBITDA Margin - 3 Yr. Avg. 58%
Operating Margin 4.3%
Oper. Margin - 3 Yr. Avg. 5.4%
Pre-Tax Margin 3%
Pre-Tax Margin - 3 Yr. Avg. 3.8%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. 2.9%
Effective Tax Rate 28.4%
Eff/ Tax Rate - 3 Yr. Avg. 21.7%
Payout Ratio 0%

NFLX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NFLX stock intrinsic value calculation we used $8831 million for the last fiscal year's total revenue generated by Netflix. The default revenue input number comes from 2016 income statement of Netflix. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NFLX stock valuation model: a) initial revenue growth rate of 30.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for NFLX is calculated based on our internal credit rating of Netflix, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Netflix.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NFLX stock the variable cost ratio is equal to 95.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NFLX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.8% for Netflix.

Corporate tax rate of 27% is the nominal tax rate for Netflix. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NFLX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NFLX are equal to 68%.

Life of production assets of 1.2 years is the average useful life of capital assets used in Netflix operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NFLX is equal to -6.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2680 million for Netflix - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 432.736 million for Netflix is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Netflix at the current share price and the inputted number of shares is $83.6 billion.

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COMPANY NEWS

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▶ Cramer: Making Money on What Matters Most to Millennials   [Nov-15-17 07:01PM  TheStreet.com]
▶ Apple To Launch Netflix Rival In 2018, Research Firm Predicts   [04:25PM  Investor's Business Daily]
▶ FAANG in focus for hedge funds in Q3   [11:03AM  CNBC Videos]
▶ FANG Falters as Tech Stocks Struggle   [11:00AM  TheStreet.com]
▶ Disney's Streaming Service Won't Compete with Netflix   [Nov-14-17 05:03PM  Motley Fool]
▶ Fullscreen shuts down Netflix alternative streaming service   [02:40PM  American City Business Journals]
▶ What Is Netflix Incs (NFLX) Share Price Doing?   [11:29AM  Simply Wall St.]
▶ How to Invest in Founder-Led Companies   [10:29AM  Harvest Exchange]
▶ New scam targets Netflix customers   [06:49PM  CBS News Videos]
▶ Stocks Close Slightly Higher; What's Eating Weight Watchers?   [04:18PM  Investor's Business Daily]
▶ FAANG Stocks Help Drive This MFS Fund's Outperformance   [08:00AM  Investor's Business Daily]
▶ Disney Streaming Service to Undercut Netflix Price   [Nov-12-17 11:29PM  Investopedia]
▶ Netflix's Biggest Markets   [12:30PM  Benzinga]
▶ [$$] Louis C.K. Acknowledges Sexual Misconduct as Media Firms Cut Ties   [Nov-10-17 10:49PM  The Wall Street Journal]
▶ Louis C.K. dropped from Netflix, HBO, FX   [10:35PM  CBS News Videos]
Financial statements of NFLX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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