Intrinsic value of Netflix - NFLX

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$366.96

  Intrinsic Value

$359.50

stock screener

  Rating & Target

hold

-2%

Previous close

$366.96

 
Intrinsic value

$359.50

 
Up/down potential

-2%

 
Rating

hold

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 0001), $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 159.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  40.30
  36.77
  33.59
  30.73
  28.16
  25.84
  23.76
  21.88
  20.20
  18.68
  17.31
  16.08
  14.97
  13.97
  13.08
  12.27
  11.54
  10.89
  10.30
  9.77
  9.29
  8.86
  8.48
  8.13
  7.82
  7.53
  7.28
  7.05
  6.85
  6.66
Revenue, $m
  16,405
  22,437
  29,974
  39,186
  50,221
  63,201
  78,217
  95,334
  114,587
  135,988
  159,525
  185,172
  212,892
  242,639
  274,366
  308,025
  343,574
  380,979
  420,214
  461,262
  504,121
  548,799
  595,317
  643,708
  694,018
  746,307
  800,644
  857,111
  915,800
  976,817
Variable operating expenses, $m
  13,188
  17,498
  22,883
  29,464
  37,348
  46,621
  57,349
  69,578
  83,333
  98,622
  113,970
  132,294
  152,098
  173,350
  196,016
  220,063
  245,461
  272,185
  300,215
  329,542
  360,162
  392,081
  425,315
  459,887
  495,831
  533,187
  572,008
  612,349
  654,280
  697,872
Fixed operating expenses, $m
  1,083
  1,107
  1,132
  1,156
  1,182
  1,208
  1,234
  1,262
  1,289
  1,318
  1,347
  1,376
  1,407
  1,438
  1,469
  1,501
  1,535
  1,568
  1,603
  1,638
  1,674
  1,711
  1,749
  1,787
  1,826
  1,867
  1,908
  1,950
  1,992
  2,036
Total operating expenses, $m
  14,271
  18,605
  24,015
  30,620
  38,530
  47,829
  58,583
  70,840
  84,622
  99,940
  115,317
  133,670
  153,505
  174,788
  197,485
  221,564
  246,996
  273,753
  301,818
  331,180
  361,836
  393,792
  427,064
  461,674
  497,657
  535,054
  573,916
  614,299
  656,272
  699,908
Operating income, $m
  2,133
  3,832
  5,960
  8,566
  11,691
  15,372
  19,633
  24,494
  29,965
  36,047
  44,208
  51,502
  59,388
  67,852
  76,880
  86,460
  96,578
  107,226
  118,396
  130,083
  142,285
  155,007
  168,253
  182,034
  196,361
  211,253
  226,728
  242,811
  259,528
  276,909
EBITDA, $m
  5,481
  7,871
  10,863
  14,525
  18,915
  24,083
  30,065
  36,888
  44,565
  53,100
  62,490
  72,723
  83,785
  95,658
  108,322
  121,759
  135,952
  150,886
  166,552
  182,943
  200,058
  217,899
  236,476
  255,802
  275,896
  296,780
  318,482
  341,036
  364,479
  388,852
Interest expense (income), $m
  139
  351
  687
  1,117
  1,655
  2,312
  3,098
  4,024
  5,094
  6,315
  7,688
  9,213
  10,891
  12,720
  14,696
  16,817
  19,079
  21,479
  24,014
  26,681
  29,478
  32,405
  35,460
  38,646
  41,962
  45,412
  49,000
  52,728
  56,602
  60,628
  64,812
Earnings before tax, $m
  1,782
  3,145
  4,842
  6,911
  9,380
  12,274
  15,610
  19,400
  23,650
  28,360
  34,995
  40,611
  46,668
  53,155
  60,063
  67,380
  75,099
  83,212
  91,715
  100,605
  109,881
  119,547
  129,607
  140,071
  150,949
  162,253
  174,001
  186,210
  198,901
  212,097
Tax expense, $m
  481
  849
  1,307
  1,866
  2,533
  3,314
  4,215
  5,238
  6,385
  7,657
  9,449
  10,965
  12,600
  14,352
  16,217
  18,193
  20,277
  22,467
  24,763
  27,163
  29,668
  32,278
  34,994
  37,819
  40,756
  43,808
  46,980
  50,277
  53,703
  57,266
Net income, $m
  1,301
  2,296
  3,535
  5,045
  6,847
  8,960
  11,395
  14,162
  17,264
  20,703
  25,546
  29,646
  34,068
  38,803
  43,846
  49,188
  54,822
  60,745
  66,952
  73,441
  80,213
  87,269
  94,613
  102,252
  110,193
  118,445
  127,021
  135,933
  145,198
  154,831

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  26,675
  36,483
  48,739
  63,718
  81,661
  102,765
  127,182
  155,015
  186,321
  221,118
  259,390
  301,093
  346,166
  394,535
  446,123
  500,853
  558,657
  619,479
  683,275
  750,020
  819,710
  892,356
  967,994
  1,046,679
  1,128,485
  1,213,507
  1,301,860
  1,393,676
  1,489,106
  1,588,321
Adjusted assets (=assets-cash), $m
  26,675
  36,483
  48,739
  63,718
  81,661
  102,765
  127,182
  155,015
  186,321
  221,118
  259,390
  301,093
  346,166
  394,535
  446,123
  500,853
  558,657
  619,479
  683,275
  750,020
  819,710
  892,356
  967,994
  1,046,679
  1,128,485
  1,213,507
  1,301,860
  1,393,676
  1,489,106
  1,588,321
Revenue / Adjusted assets
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
  0.615
Average production assets, $m
  9,400
  12,856
  17,175
  22,454
  28,777
  36,214
  44,818
  54,626
  65,659
  77,921
  91,408
  106,104
  121,987
  139,032
  157,211
  176,498
  196,868
  218,301
  240,783
  264,303
  288,862
  314,462
  341,116
  368,844
  397,672
  427,634
  458,769
  491,124
  524,754
  559,716
Working capital, $m
  -869
  -1,189
  -1,589
  -2,077
  -2,662
  -3,350
  -4,146
  -5,053
  -6,073
  -7,207
  -8,455
  -9,814
  -11,283
  -12,860
  -14,541
  -16,325
  -18,209
  -20,192
  -22,271
  -24,447
  -26,718
  -29,086
  -31,552
  -34,117
  -36,783
  -39,554
  -42,434
  -45,427
  -48,537
  -51,771
Total debt, $m
  12,728
  20,693
  30,644
  42,807
  57,377
  74,514
  94,341
  116,941
  142,361
  170,616
  201,693
  235,556
  272,156
  311,431
  353,320
  397,761
  444,698
  494,085
  545,888
  600,085
  656,673
  715,662
  777,080
  840,972
  907,398
  976,436
  1,048,179
  1,122,733
  1,200,223
  1,280,785
Total liabilities, $m
  21,660
  29,624
  39,576
  51,739
  66,309
  83,446
  103,272
  125,872
  151,293
  179,548
  210,625
  244,488
  281,087
  320,363
  362,252
  406,693
  453,630
  503,017
  554,819
  609,016
  665,604
  724,593
  786,012
  849,903
  916,330
  985,368
  1,057,110
  1,131,665
  1,209,154
  1,289,716
Total equity, $m
  5,015
  6,859
  9,163
  11,979
  15,352
  19,320
  23,910
  29,143
  35,028
  41,570
  48,765
  56,606
  65,079
  74,173
  83,871
  94,160
  105,028
  116,462
  128,456
  141,004
  154,105
  167,763
  181,983
  196,776
  212,155
  228,139
  244,750
  262,011
  279,952
  298,604
Total liabilities and equity, $m
  26,675
  36,483
  48,739
  63,718
  81,661
  102,766
  127,182
  155,015
  186,321
  221,118
  259,390
  301,094
  346,166
  394,536
  446,123
  500,853
  558,658
  619,479
  683,275
  750,020
  819,709
  892,356
  967,995
  1,046,679
  1,128,485
  1,213,507
  1,301,860
  1,393,676
  1,489,106
  1,588,320
Debt-to-equity ratio
  2.540
  3.020
  3.340
  3.570
  3.740
  3.860
  3.950
  4.010
  4.060
  4.100
  4.140
  4.160
  4.180
  4.200
  4.210
  4.220
  4.230
  4.240
  4.250
  4.260
  4.260
  4.270
  4.270
  4.270
  4.280
  4.280
  4.280
  4.290
  4.290
  4.290
Adjusted equity ratio
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188
  0.188

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,301
  2,296
  3,535
  5,045
  6,847
  8,960
  11,395
  14,162
  17,264
  20,703
  25,546
  29,646
  34,068
  38,803
  43,846
  49,188
  54,822
  60,745
  66,952
  73,441
  80,213
  87,269
  94,613
  102,252
  110,193
  118,445
  127,021
  135,933
  145,198
  154,831
Depreciation, amort., depletion, $m
  3,348
  4,039
  4,903
  5,959
  7,224
  8,711
  10,432
  12,393
  14,600
  17,052
  18,282
  21,221
  24,397
  27,806
  31,442
  35,300
  39,374
  43,660
  48,157
  52,861
  57,772
  62,892
  68,223
  73,769
  79,534
  85,527
  91,754
  98,225
  104,951
  111,943
Funds from operations, $m
  4,649
  6,335
  8,438
  11,004
  14,071
  17,671
  21,827
  26,555
  31,864
  37,755
  43,828
  50,867
  58,465
  66,610
  75,288
  84,487
  94,196
  104,405
  115,109
  126,302
  137,985
  150,161
  162,837
  176,021
  189,727
  203,972
  218,774
  234,158
  250,148
  266,774
Change in working capital, $m
  -250
  -320
  -399
  -488
  -585
  -688
  -796
  -907
  -1,020
  -1,134
  -1,247
  -1,359
  -1,469
  -1,577
  -1,681
  -1,784
  -1,884
  -1,982
  -2,079
  -2,176
  -2,272
  -2,368
  -2,465
  -2,565
  -2,666
  -2,771
  -2,880
  -2,993
  -3,111
  -3,234
Cash from operations, $m
  4,899
  6,655
  8,838
  11,492
  14,656
  18,359
  22,623
  27,463
  32,885
  38,889
  45,075
  52,226
  59,934
  68,186
  76,970
  86,271
  96,080
  106,388
  117,188
  128,478
  140,257
  152,529
  165,302
  178,586
  192,394
  206,743
  221,654
  237,151
  253,259
  270,008
Maintenance CAPEX, $m
  -1,341
  -1,880
  -2,571
  -3,435
  -4,491
  -5,755
  -7,243
  -8,964
  -10,925
  -13,132
  -15,584
  -18,282
  -21,221
  -24,397
  -27,806
  -31,442
  -35,300
  -39,374
  -43,660
  -48,157
  -52,861
  -57,772
  -62,892
  -68,223
  -73,769
  -79,534
  -85,527
  -91,754
  -98,225
  -104,951
New CAPEX, $m
  -2,694
  -3,456
  -4,319
  -5,279
  -6,323
  -7,437
  -8,604
  -9,808
  -11,032
  -12,262
  -13,487
  -14,696
  -15,883
  -17,045
  -18,179
  -19,287
  -20,370
  -21,433
  -22,481
  -23,521
  -24,558
  -25,600
  -26,655
  -27,728
  -28,828
  -29,961
  -31,135
  -32,356
  -33,629
  -34,963
Cash from investing activities, $m
  -4,035
  -5,336
  -6,890
  -8,714
  -10,814
  -13,192
  -15,847
  -18,772
  -21,957
  -25,394
  -29,071
  -32,978
  -37,104
  -41,442
  -45,985
  -50,729
  -55,670
  -60,807
  -66,141
  -71,678
  -77,419
  -83,372
  -89,547
  -95,951
  -102,597
  -109,495
  -116,662
  -124,110
  -131,854
  -139,914
Free cash flow, $m
  863
  1,318
  1,948
  2,779
  3,842
  5,166
  6,776
  8,691
  10,927
  13,495
  16,004
  19,249
  22,830
  26,744
  30,984
  35,542
  40,411
  45,581
  51,046
  56,800
  62,838
  69,157
  75,755
  82,634
  89,797
  97,247
  104,993
  113,042
  121,405
  130,094
Issuance/(repayment) of debt, $m
  6,229
  7,964
  9,952
  12,163
  14,570
  17,137
  19,827
  22,600
  25,420
  28,255
  31,077
  33,863
  36,599
  39,276
  41,889
  44,441
  46,937
  49,387
  51,802
  54,198
  56,588
  58,989
  61,418
  63,892
  66,426
  69,038
  71,742
  74,555
  77,490
  80,562
Issuance/(repurchase) of shares, $m
  132
  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 from financing (excl. dividends), $m  
  6,361
  7,964
  9,952
  12,163
  14,570
  17,137
  19,827
  22,600
  25,420
  28,255
  31,077
  33,863
  36,599
  39,276
  41,889
  44,441
  46,937
  49,387
  51,802
  54,198
  56,588
  58,989
  61,418
  63,892
  66,426
  69,038
  71,742
  74,555
  77,490
  80,562
Total cash flow (excl. dividends), $m
  7,224
  9,283
  11,899
  14,942
  18,412
  22,303
  26,602
  31,291
  36,348
  41,751
  47,081
  53,112
  59,429
  66,020
  72,873
  79,983
  87,348
  94,968
  102,849
  110,998
  119,426
  128,146
  137,174
  146,526
  156,223
  166,285
  176,735
  187,596
  198,894
  210,656
Retained Cash Flow (-), $m
  -1,433
  -1,844
  -2,304
  -2,816
  -3,373
  -3,968
  -4,590
  -5,232
  -5,886
  -6,542
  -7,195
  -7,840
  -8,474
  -9,093
  -9,698
  -10,289
  -10,867
  -11,434
  -11,994
  -12,548
  -13,102
  -13,658
  -14,220
  -14,793
  -15,380
  -15,984
  -16,610
  -17,261
  -17,941
  -18,652
Prev. year cash balance distribution, $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 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
  5,791
  7,439
  9,595
  12,126
  15,038
  18,335
  22,012
  26,058
  30,462
  35,209
  39,886
  45,271
  50,956
  56,926
  63,175
  69,694
  76,480
  83,534
  90,855
  98,450
  106,324
  114,488
  122,954
  131,733
  140,843
  150,301
  160,125
  170,335
  180,953
  192,004
Discount rate, %
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
  5,353
  6,306
  7,401
  8,436
  9,352
  10,091
  10,610
  10,878
  10,884
  10,632
  10,044
  9,372
  8,543
  7,606
  6,614
  5,616
  4,654
  3,763
  2,966
  2,278
  1,703
  1,239
  875
  600
  399
  257
  160
  96
  56
  31
Current shareholders' claim on cash, %
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6

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 843.9
Price to Sales 17.9
Price to Book 58.9
Price to Tangible Book
Price to Cash Flow -107.1
Price to Free Cash Flow -95.1
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 $11692.713 million for the last fiscal year's total revenue generated by Netflix. The default revenue input number comes from 0001 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 40.3% 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 8.2%, 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 84%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1060 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 5.4% 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 57.3%.

Life of production assets of 2.1 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 -5.3%. 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 - $3581.956 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 434.693 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 $159.5 billion.

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COMPANY NEWS

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▶ Montana photographer sues Netflix over copyright law   [Sep-15-18 06:37PM  Associated Press]
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