Intrinsic value of Netflix - NFLX

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$183.60

  Intrinsic Value

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  Value-price divergence*

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$183.60

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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 78.3

 

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
  34.70
  31.73
  29.06
  26.65
  24.49
  22.54
  20.78
  19.21
  17.78
  16.51
  15.36
  14.32
  13.39
  12.55
  11.79
  11.11
  10.50
  9.95
  9.46
  9.01
  8.61
  8.25
  7.92
  7.63
  7.37
  7.13
  6.92
  6.73
  6.55
  6.40
Revenue, $m
  8,831
  11,895
  15,670
  20,223
  25,613
  31,884
  39,070
  47,190
  56,253
  66,258
  77,195
  89,049
  101,800
  115,430
  129,915
  145,238
  161,381
  178,332
  196,081
  214,626
  233,969
  254,115
  275,079
  296,879
  319,537
  343,084
  367,553
  392,984
  419,420
  446,911
  475,508
Variable operating expenses, $m
 
  11,360
  14,965
  19,313
  24,460
  30,449
  37,312
  45,067
  53,722
  63,276
  73,721
  85,041
  97,219
  110,235
  124,069
  138,702
  154,119
  170,307
  187,258
  204,968
  223,440
  242,680
  262,701
  283,519
  305,158
  327,645
  351,014
  375,300
  400,547
  426,800
  454,110
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
  11,360
  14,965
  19,313
  24,460
  30,449
  37,312
  45,067
  53,722
  63,276
  73,721
  85,041
  97,219
  110,235
  124,069
  138,702
  154,119
  170,307
  187,258
  204,968
  223,440
  242,680
  262,701
  283,519
  305,158
  327,645
  351,014
  375,300
  400,547
  426,800
  454,110
Operating income, $m
  380
  535
  705
  910
  1,153
  1,435
  1,758
  2,124
  2,531
  2,982
  3,474
  4,007
  4,581
  5,194
  5,846
  6,536
  7,262
  8,025
  8,824
  9,658
  10,529
  11,435
  12,379
  13,360
  14,379
  15,439
  16,540
  17,684
  18,874
  20,111
  21,398
EBITDA, $m
  5,305
  1,344
  1,771
  2,285
  2,894
  3,603
  4,415
  5,332
  6,357
  7,487
  8,723
  10,062
  11,503
  13,044
  14,680
  16,412
  18,236
  20,152
  22,157
  24,253
  26,438
  28,715
  31,084
  33,547
  36,108
  38,769
  41,534
  44,407
  47,395
  50,501
  53,732
Interest expense (income), $m
  139
  163
  329
  548
  812
  1,125
  1,488
  1,905
  2,376
  2,901
  3,481
  4,116
  4,803
  5,542
  6,333
  7,173
  8,061
  8,997
  9,980
  11,009
  12,085
  13,206
  14,375
  15,590
  16,854
  18,168
  19,534
  20,953
  22,427
  23,960
  25,554
Earnings before tax, $m
  261
  372
  376
  362
  341
  310
  270
  219
  156
  80
  -8
  -108
  -222
  -348
  -487
  -637
  -799
  -972
  -1,157
  -1,351
  -1,556
  -1,771
  -1,996
  -2,231
  -2,475
  -2,729
  -2,994
  -3,268
  -3,553
  -3,849
  -4,156
Tax expense, $m
  74
  101
  102
  98
  92
  84
  73
  59
  42
  22
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  187
  272
  274
  264
  249
  226
  197
  160
  114
  59
  -8
  -108
  -222
  -348
  -487
  -637
  -799
  -972
  -1,157
  -1,351
  -1,556
  -1,771
  -1,996
  -2,231
  -2,475
  -2,729
  -2,994
  -3,268
  -3,553
  -3,849
  -4,156

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
  15,967
  21,033
  27,145
  34,379
  42,797
  52,443
  63,343
  75,508
  88,937
  103,617
  119,528
  136,645
  154,939
  174,383
  194,950
  216,619
  239,372
  263,197
  288,089
  314,052
  341,094
  369,234
  398,495
  428,909
  460,516
  493,360
  527,496
  562,980
  599,880
  638,266
Adjusted assets (=assets-cash), $m
  11,853
  15,967
  21,033
  27,145
  34,379
  42,797
  52,443
  63,343
  75,508
  88,937
  103,617
  119,528
  136,645
  154,939
  174,383
  194,950
  216,619
  239,372
  263,197
  288,089
  314,052
  341,094
  369,234
  398,495
  428,909
  460,516
  493,360
  527,496
  562,980
  599,880
  638,266
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
  8,089
  10,655
  13,752
  17,417
  21,681
  26,568
  32,089
  38,252
  45,055
  52,492
  60,553
  69,224
  78,492
  88,342
  98,762
  109,739
  121,266
  133,335
  145,946
  159,099
  172,798
  187,054
  201,877
  217,285
  233,297
  249,936
  267,229
  285,206
  303,899
  323,346
Working capital, $m
  1,133
  -809
  -1,066
  -1,375
  -1,742
  -2,168
  -2,657
  -3,209
  -3,825
  -4,506
  -5,249
  -6,055
  -6,922
  -7,849
  -8,834
  -9,876
  -10,974
  -12,127
  -13,334
  -14,595
  -15,910
  -17,280
  -18,705
  -20,188
  -21,729
  -23,330
  -24,994
  -26,723
  -28,521
  -30,390
  -32,335
Total debt, $m
  3,394
  6,857
  11,417
  16,917
  23,428
  31,005
  39,686
  49,495
  60,444
  72,530
  85,742
  100,062
  115,467
  131,932
  149,432
  167,942
  187,444
  207,921
  229,364
  251,767
  275,134
  299,472
  324,797
  351,132
  378,505
  406,951
  436,511
  467,233
  499,169
  532,379
  566,926
Total liabilities, $m
  10,907
  14,370
  18,930
  24,430
  30,941
  38,518
  47,199
  57,008
  67,957
  80,043
  93,255
  107,575
  122,980
  139,445
  156,945
  175,455
  194,957
  215,434
  236,877
  259,280
  282,647
  306,985
  332,310
  358,645
  386,018
  414,464
  444,024
  474,746
  506,682
  539,892
  574,439
Total equity, $m
  2,680
  1,597
  2,103
  2,714
  3,438
  4,280
  5,244
  6,334
  7,551
  8,894
  10,362
  11,953
  13,664
  15,494
  17,438
  19,495
  21,662
  23,937
  26,320
  28,809
  31,405
  34,109
  36,923
  39,849
  42,891
  46,052
  49,336
  52,750
  56,298
  59,988
  63,827
Total liabilities and equity, $m
  13,587
  15,967
  21,033
  27,144
  34,379
  42,798
  52,443
  63,342
  75,508
  88,937
  103,617
  119,528
  136,644
  154,939
  174,383
  194,950
  216,619
  239,371
  263,197
  288,089
  314,052
  341,094
  369,233
  398,494
  428,909
  460,516
  493,360
  527,496
  562,980
  599,880
  638,266
Debt-to-equity ratio
  1.266
  4.290
  5.430
  6.230
  6.810
  7.240
  7.570
  7.810
  8.010
  8.160
  8.270
  8.370
  8.450
  8.520
  8.570
  8.610
  8.650
  8.690
  8.710
  8.740
  8.760
  8.780
  8.800
  8.810
  8.820
  8.840
  8.850
  8.860
  8.870
  8.870
  8.880
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
  272
  274
  264
  249
  226
  197
  160
  114
  59
  -8
  -108
  -222
  -348
  -487
  -637
  -799
  -972
  -1,157
  -1,351
  -1,556
  -1,771
  -1,996
  -2,231
  -2,475
  -2,729
  -2,994
  -3,268
  -3,553
  -3,849
  -4,156
Depreciation, amort., depletion, $m
  4,925
  809
  1,066
  1,375
  1,742
  2,168
  2,657
  3,209
  3,825
  4,506
  5,249
  6,055
  6,922
  7,849
  8,834
  9,876
  10,974
  12,127
  13,334
  14,595
  15,910
  17,280
  18,705
  20,188
  21,729
  23,330
  24,994
  26,723
  28,521
  30,390
  32,335
Funds from operations, $m
  -1,282
  1,081
  1,340
  1,639
  1,990
  2,395
  2,854
  3,369
  3,939
  4,564
  5,242
  5,947
  6,700
  7,501
  8,348
  9,239
  10,175
  11,154
  12,177
  13,243
  14,354
  15,509
  16,709
  17,957
  19,253
  20,600
  22,000
  23,455
  24,967
  26,541
  28,178
Change in working capital, $m
  192
  -208
  -257
  -310
  -366
  -426
  -489
  -552
  -616
  -680
  -744
  -806
  -867
  -927
  -985
  -1,042
  -1,098
  -1,153
  -1,207
  -1,261
  -1,315
  -1,370
  -1,426
  -1,482
  -1,541
  -1,601
  -1,664
  -1,729
  -1,798
  -1,869
  -1,945
Cash from operations, $m
  -1,474
  1,289
  1,597
  1,949
  2,357
  2,821
  3,342
  3,921
  4,555
  5,244
  5,985
  6,753
  7,568
  8,428
  9,333
  10,281
  11,273
  12,307
  13,384
  14,504
  15,669
  16,879
  18,135
  19,439
  20,794
  22,201
  23,664
  25,184
  26,765
  28,410
  30,123
Maintenance CAPEX, $m
  0
  -601
  -809
  -1,066
  -1,375
  -1,742
  -2,168
  -2,657
  -3,209
  -3,825
  -4,506
  -5,249
  -6,055
  -6,922
  -7,849
  -8,834
  -9,876
  -10,974
  -12,127
  -13,334
  -14,595
  -15,910
  -17,280
  -18,705
  -20,188
  -21,729
  -23,330
  -24,994
  -26,723
  -28,521
  -30,390
New CAPEX, $m
  -185
  -2,082
  -2,567
  -3,096
  -3,665
  -4,265
  -4,886
  -5,522
  -6,163
  -6,803
  -7,437
  -8,061
  -8,671
  -9,268
  -9,850
  -10,419
  -10,977
  -11,526
  -12,070
  -12,611
  -13,153
  -13,700
  -14,255
  -14,824
  -15,408
  -16,012
  -16,639
  -17,293
  -17,977
  -18,693
  -19,446
Cash from investing activities, $m
  50
  -2,683
  -3,376
  -4,162
  -5,040
  -6,007
  -7,054
  -8,179
  -9,372
  -10,628
  -11,943
  -13,310
  -14,726
  -16,190
  -17,699
  -19,253
  -20,853
  -22,500
  -24,197
  -25,945
  -27,748
  -29,610
  -31,535
  -33,529
  -35,596
  -37,741
  -39,969
  -42,287
  -44,700
  -47,214
  -49,836
Free cash flow, $m
  -1,424
  -1,394
  -1,779
  -2,213
  -2,683
  -3,185
  -3,712
  -4,258
  -4,817
  -5,384
  -5,957
  -6,557
  -7,159
  -7,762
  -8,367
  -8,973
  -9,581
  -10,194
  -10,812
  -11,440
  -12,078
  -12,731
  -13,400
  -14,090
  -14,801
  -15,539
  -16,305
  -17,103
  -17,935
  -18,804
  -19,713
Issuance/(repayment) of debt, $m
  1,000
  3,463
  4,560
  5,500
  6,511
  7,576
  8,681
  9,810
  10,949
  12,086
  13,212
  14,320
  15,405
  16,465
  17,499
  18,511
  19,502
  20,477
  21,442
  22,403
  23,366
  24,338
  25,325
  26,335
  27,373
  28,446
  29,560
  30,722
  31,936
  33,210
  34,547
Issuance/(repurchase) of shares, $m
  37
  379
  232
  347
  475
  615
  768
  930
  1,103
  1,284
  1,476
  1,700
  1,934
  2,178
  2,431
  2,694
  2,966
  3,248
  3,539
  3,841
  4,153
  4,475
  4,810
  5,157
  5,517
  5,890
  6,278
  6,682
  7,102
  7,539
  7,995
Cash from financing (excl. dividends), $m  
  1,092
  3,842
  4,792
  5,847
  6,986
  8,191
  9,449
  10,740
  12,052
  13,370
  14,688
  16,020
  17,339
  18,643
  19,930
  21,205
  22,468
  23,725
  24,981
  26,244
  27,519
  28,813
  30,135
  31,492
  32,890
  34,336
  35,838
  37,404
  39,038
  40,749
  42,542
Total cash flow (excl. dividends), $m
  -342
  2,448
  3,013
  3,635
  4,302
  5,006
  5,736
  6,482
  7,235
  7,986
  8,731
  9,463
  10,180
  10,880
  11,564
  12,232
  12,887
  13,531
  14,169
  14,804
  15,441
  16,083
  16,735
  17,402
  18,088
  18,797
  19,533
  20,301
  21,104
  21,945
  22,829
Retained Cash Flow (-), $m
  -457
  -651
  -507
  -611
  -723
  -842
  -965
  -1,090
  -1,217
  -1,343
  -1,476
  -1,700
  -1,934
  -2,178
  -2,431
  -2,694
  -2,966
  -3,248
  -3,539
  -3,841
  -4,153
  -4,475
  -4,810
  -5,157
  -5,517
  -5,890
  -6,278
  -6,682
  -7,102
  -7,539
  -7,995
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
 
  3,531
  2,506
  3,024
  3,579
  4,165
  4,772
  5,392
  6,018
  6,644
  7,255
  7,763
  8,246
  8,702
  9,133
  9,538
  9,921
  10,284
  10,630
  10,964
  11,288
  11,607
  11,925
  12,245
  12,571
  12,907
  13,255
  13,619
  14,002
  14,406
  14,834
Discount rate, %
 
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
 
  3,276
  2,141
  2,361
  2,533
  2,648
  2,700
  2,689
  2,616
  2,489
  2,315
  2,083
  1,835
  1,583
  1,337
  1,106
  896
  710
  551
  417
  309
  223
  158
  108
  73
  47
  30
  18
  11
  6
  3
Current shareholders' claim on cash, %
  100
  96.1
  94.8
  93.2
  91.6
  90.0
  88.4
  86.9
  85.4
  84.0
  82.6
  81.3
  80.0
  78.7
  77.5
  76.3
  75.2
  74.1
  73.0
  71.9
  70.9
  69.9
  69.0
  68.0
  67.1
  66.2
  65.3
  64.4
  63.6
  62.7
  61.9

Netflix, Inc., an Internet television network, engages in the Internet delivery of television (TV) shows and movies on various Internet-connected screens. The company operates in three segments: Domestic Streaming, International Streaming, and Domestic DVD. It offers members with the ability to receive streaming content through a host of Internet-connected screens, including TVs, digital video players, television set-top boxes, and mobile devices. The company also provides DVDs-by-mail membership services. It serves approximately 93 million streaming members in 190 countries. Netflix, Inc. was founded in 1997 and is headquartered in Los Gatos, California.

FINANCIAL RATIOS  of  Netflix (NFLX)

Valuation Ratios
P/E Ratio 422.2
Price to Sales 8.9
Price to Book 29.5
Price to Tangible Book
Price to Cash Flow -53.6
Price to Free Cash Flow -47.6
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 34.7% 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 7.8%, 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 10 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 426.569 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 $78.3 billion.


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COMPANY NEWS

▶ Netflixs worst show doesnt air on Netflix   [07:12AM  MarketWatch]
▶ How AMC Networks Competes With Netflix and Amazon   [Jul-19-17 07:47PM  Bloomberg Video]
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▶ 10 YouTube channels for binge-watching   [12:59PM  MarketWatch]
▶ [$$] Netflix: powerful streams   [12:26PM  Financial Times]
▶ Netflix expected to keep rising   [08:52AM  CNBC Videos]
▶ Is Netflixs Subscriber Growth Sustainable?   [07:39AM  Market Realist]
▶ Bull of the Day: Netflix (NFLX)   [07:00AM  Zacks]
▶ Asian shares mostly higher as focus turns to central bankers   [Jul-18-17 11:25PM  Associated Press]
▶ Cramer: We Need a Vaccine for Washington   [07:01PM  TheStreet.com]
▶ Cramer: The key to Netflix's success   [06:56PM  CNBC Videos]
▶ What Happened in the Stock Market Today   [04:55PM  Motley Fool]
▶ The Hot Stock: Netflix Soars 13.5%   [04:49PM  Barrons.com]
▶ 5 Key Takeaways From Netflix's Monster Second-Quarter Beat   [04:44PM  Investor's Business Daily]
▶ Tech Names Lead Mixed Finish, Transports Slide After Close   [04:24PM  Investor's Business Daily]
▶ Netflix Hailed, AMD Hammered, Fintech Stocks Upped   [04:15PM  Investor's Business Daily]
▶ Jefferies Sees 15% Upside for Charles Schwab   [02:53PM  TheStreet.com]
Stock chart of NFLX Financial statements of NFLX Annual reports 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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