Intrinsic value of Netflix, Inc. - NFLX

Previous Close

$360.35

  Intrinsic Value

$235.23

stock screener

  Rating & Target

sell

-35%

Previous close

$360.35

 
Intrinsic value

$235.23

 
Up/down potential

-35%

 
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 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 157.3

 

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, %
  27.40
  25.16
  23.14
  21.33
  19.70
  18.23
  16.90
  15.71
  14.64
  13.68
  12.81
  12.03
  11.33
  10.69
  10.12
  9.61
  9.15
  8.74
  8.36
  8.03
  7.72
  7.45
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
  6.17
  6.06
Revenue, $m
  20,122
  25,184
  31,013
  37,628
  45,039
  53,248
  62,250
  72,031
  82,578
  93,874
  105,899
  118,638
  132,076
  146,200
  161,002
  176,477
  192,626
  209,453
  226,968
  245,184
  264,121
  283,800
  304,250
  325,503
  347,594
  370,564
  394,455
  419,316
  445,197
  472,154
Variable operating expenses, $m
  15,808
  19,279
  23,275
  27,811
  32,893
  38,521
  44,693
  51,400
  58,632
  66,377
  72,611
  81,346
  90,559
  100,243
  110,392
  121,003
  132,076
  143,614
  155,623
  168,113
  181,097
  194,591
  208,613
  223,185
  238,332
  254,081
  270,462
  287,508
  305,254
  323,737
Fixed operating expenses, $m
  1,406
  1,437
  1,469
  1,501
  1,534
  1,568
  1,602
  1,638
  1,674
  1,711
  1,748
  1,787
  1,826
  1,866
  1,907
  1,949
  1,992
  2,036
  2,081
  2,126
  2,173
  2,221
  2,270
  2,320
  2,371
  2,423
  2,476
  2,531
  2,586
  2,643
Total operating expenses, $m
  17,214
  20,716
  24,744
  29,312
  34,427
  40,089
  46,295
  53,038
  60,306
  68,088
  74,359
  83,133
  92,385
  102,109
  112,299
  122,952
  134,068
  145,650
  157,704
  170,239
  183,270
  196,812
  210,883
  225,505
  240,703
  256,504
  272,938
  290,039
  307,840
  326,380
Operating income, $m
  2,908
  4,468
  6,269
  8,316
  10,612
  13,159
  15,954
  18,993
  22,273
  25,787
  31,540
  35,506
  39,691
  44,090
  48,702
  53,525
  58,558
  63,804
  69,264
  74,945
  80,850
  86,989
  93,368
  99,999
  106,892
  114,060
  121,517
  129,277
  137,357
  145,773
EBITDA, $m
  7,229
  9,370
  11,840
  14,646
  17,794
  21,283
  25,111
  29,274
  33,764
  38,574
  43,697
  49,126
  54,853
  60,874
  67,185
  73,784
  80,671
  87,849
  95,320
  103,092
  111,171
  119,569
  128,296
  137,367
  146,796
  156,601
  166,800
  177,414
  188,465
  199,977
Interest expense (income), $m
  139
  559
  866
  1,225
  1,638
  2,107
  2,632
  3,214
  3,852
  4,545
  5,292
  6,093
  6,945
  7,848
  8,801
  9,802
  10,851
  11,948
  13,092
  14,285
  15,526
  16,817
  18,159
  19,554
  21,003
  22,510
  24,075
  25,703
  27,397
  29,159
  30,993
Earnings before tax, $m
  2,348
  3,602
  5,044
  6,678
  8,506
  10,527
  12,740
  15,142
  17,728
  20,494
  25,447
  28,561
  31,843
  35,290
  38,900
  42,674
  46,610
  50,712
  54,980
  59,419
  64,033
  68,829
  73,814
  78,995
  84,382
  89,984
  95,813
  101,880
  108,198
  114,780
Tax expense, $m
  634
  973
  1,362
  1,803
  2,297
  2,842
  3,440
  4,088
  4,787
  5,533
  6,871
  7,711
  8,597
  9,528
  10,503
  11,522
  12,585
  13,692
  14,845
  16,043
  17,289
  18,584
  19,930
  21,329
  22,783
  24,296
  25,870
  27,508
  29,213
  30,991
Net income, $m
  1,714
  2,630
  3,682
  4,875
  6,209
  7,685
  9,300
  11,053
  12,941
  14,961
  18,576
  20,849
  23,245
  25,761
  28,397
  31,152
  34,026
  37,019
  40,135
  43,376
  46,744
  50,245
  53,884
  57,667
  61,599
  65,689
  69,944
  74,372
  78,985
  83,790

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
  33,095
  41,421
  51,008
  61,888
  74,077
  87,579
  102,384
  118,473
  135,820
  154,398
  174,177
  195,129
  217,230
  240,460
  264,805
  290,258
  316,819
  344,495
  373,303
  403,263
  434,409
  466,777
  500,412
  535,367
  571,701
  609,480
  648,775
  689,664
  732,232
  776,569
Adjusted assets (=assets-cash), $m
  33,095
  41,421
  51,008
  61,888
  74,077
  87,579
  102,384
  118,473
  135,820
  154,398
  174,177
  195,129
  217,230
  240,460
  264,805
  290,258
  316,819
  344,495
  373,303
  403,263
  434,409
  466,777
  500,412
  535,367
  571,701
  609,480
  648,775
  689,664
  732,232
  776,569
Revenue / Adjusted assets
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
Average production assets, $m
  11,550
  14,456
  17,801
  21,598
  25,852
  30,565
  35,731
  41,346
  47,400
  53,884
  60,786
  68,098
  75,812
  83,919
  92,415
  101,298
  110,567
  120,226
  130,280
  140,736
  151,605
  162,901
  174,640
  186,839
  199,519
  212,704
  226,417
  240,687
  255,543
  271,017
Working capital, $m
  -744
  -932
  -1,147
  -1,392
  -1,666
  -1,970
  -2,303
  -2,665
  -3,055
  -3,473
  -3,918
  -4,390
  -4,887
  -5,409
  -5,957
  -6,530
  -7,127
  -7,750
  -8,398
  -9,072
  -9,772
  -10,501
  -11,257
  -12,044
  -12,861
  -13,711
  -14,595
  -15,515
  -16,472
  -17,470
Total debt, $m
  16,034
  22,679
  30,329
  39,011
  48,738
  59,513
  71,327
  84,166
  98,009
  112,834
  128,617
  145,337
  162,974
  181,512
  200,939
  221,251
  242,446
  264,532
  287,520
  311,429
  336,283
  362,112
  388,953
  416,847
  445,842
  475,989
  507,347
  539,976
  573,946
  609,327
Total liabilities, $m
  26,410
  33,054
  40,704
  49,386
  59,114
  69,888
  81,703
  94,541
  108,384
  123,209
  138,993
  155,713
  173,350
  191,887
  211,315
  231,626
  252,822
  274,907
  297,895
  321,804
  346,658
  372,488
  399,329
  427,223
  456,218
  486,365
  517,722
  550,352
  584,321
  619,702
Total equity, $m
  6,685
  8,367
  10,304
  12,501
  14,964
  17,691
  20,682
  23,931
  27,436
  31,188
  35,184
  39,416
  43,880
  48,573
  53,491
  58,632
  63,997
  69,588
  75,407
  81,459
  87,751
  94,289
  101,083
  108,144
  115,484
  123,115
  131,052
  139,312
  147,911
  156,867
Total liabilities and equity, $m
  33,095
  41,421
  51,008
  61,887
  74,078
  87,579
  102,385
  118,472
  135,820
  154,397
  174,177
  195,129
  217,230
  240,460
  264,806
  290,258
  316,819
  344,495
  373,302
  403,263
  434,409
  466,777
  500,412
  535,367
  571,702
  609,480
  648,774
  689,664
  732,232
  776,569
Debt-to-equity ratio
  2.400
  2.710
  2.940
  3.120
  3.260
  3.360
  3.450
  3.520
  3.570
  3.620
  3.660
  3.690
  3.710
  3.740
  3.760
  3.770
  3.790
  3.800
  3.810
  3.820
  3.830
  3.840
  3.850
  3.850
  3.860
  3.870
  3.870
  3.880
  3.880
  3.880
Adjusted equity ratio
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,714
  2,630
  3,682
  4,875
  6,209
  7,685
  9,300
  11,053
  12,941
  14,961
  18,576
  20,849
  23,245
  25,761
  28,397
  31,152
  34,026
  37,019
  40,135
  43,376
  46,744
  50,245
  53,884
  57,667
  61,599
  65,689
  69,944
  74,372
  78,985
  83,790
Depreciation, amort., depletion, $m
  4,321
  4,902
  5,571
  6,331
  7,182
  8,124
  9,157
  10,280
  11,491
  12,788
  12,157
  13,620
  15,162
  16,784
  18,483
  20,260
  22,113
  24,045
  26,056
  28,147
  30,321
  32,580
  34,928
  37,368
  39,904
  42,541
  45,283
  48,137
  51,109
  54,203
Funds from operations, $m
  6,035
  7,532
  9,253
  11,206
  13,391
  15,809
  18,458
  21,334
  24,433
  27,749
  30,734
  34,469
  38,407
  42,545
  46,880
  51,412
  56,139
  61,065
  66,191
  71,523
  77,065
  82,826
  88,812
  95,034
  101,503
  108,229
  115,227
  122,510
  130,093
  137,993
Change in working capital, $m
  -160
  -187
  -216
  -245
  -274
  -304
  -333
  -362
  -390
  -418
  -445
  -471
  -497
  -523
  -548
  -573
  -598
  -623
  -648
  -674
  -701
  -728
  -757
  -786
  -817
  -850
  -884
  -920
  -958
  -997
Cash from operations, $m
  6,195
  7,719
  9,469
  11,450
  13,665
  16,113
  18,791
  21,696
  24,823
  28,166
  31,179
  34,940
  38,905
  43,068
  47,428
  51,984
  56,737
  61,687
  66,839
  72,197
  77,766
  83,554
  89,569
  95,821
  102,320
  109,079
  116,111
  123,430
  131,051
  138,990
Maintenance CAPEX, $m
  -1,813
  -2,310
  -2,891
  -3,560
  -4,320
  -5,170
  -6,113
  -7,146
  -8,269
  -9,480
  -10,777
  -12,157
  -13,620
  -15,162
  -16,784
  -18,483
  -20,260
  -22,113
  -24,045
  -26,056
  -28,147
  -30,321
  -32,580
  -34,928
  -37,368
  -39,904
  -42,541
  -45,283
  -48,137
  -51,109
New CAPEX, $m
  -2,482
  -2,906
  -3,346
  -3,797
  -4,254
  -4,712
  -5,167
  -5,615
  -6,054
  -6,483
  -6,903
  -7,312
  -7,713
  -8,107
  -8,496
  -8,883
  -9,270
  -9,659
  -10,053
  -10,456
  -10,869
  -11,296
  -11,738
  -12,199
  -12,680
  -13,184
  -13,714
  -14,270
  -14,856
  -15,473
Cash from investing activities, $m
  -4,295
  -5,216
  -6,237
  -7,357
  -8,574
  -9,882
  -11,280
  -12,761
  -14,323
  -15,963
  -17,680
  -19,469
  -21,333
  -23,269
  -25,280
  -27,366
  -29,530
  -31,772
  -34,098
  -36,512
  -39,016
  -41,617
  -44,318
  -47,127
  -50,048
  -53,088
  -56,255
  -59,553
  -62,993
  -66,582
Free cash flow, $m
  1,900
  2,503
  3,232
  4,093
  5,091
  6,230
  7,511
  8,935
  10,500
  12,203
  13,499
  15,471
  17,572
  19,798
  22,148
  24,618
  27,208
  29,915
  32,740
  35,685
  38,749
  41,937
  45,250
  48,694
  52,272
  55,991
  59,857
  63,876
  68,057
  72,408
Issuance/(repayment) of debt, $m
  5,674
  6,645
  7,650
  8,682
  9,727
  10,775
  11,814
  12,839
  13,843
  14,825
  15,784
  16,720
  17,637
  18,538
  19,427
  20,311
  21,196
  22,086
  22,988
  23,909
  24,854
  25,829
  26,841
  27,894
  28,995
  30,147
  31,357
  32,630
  33,969
  35,381
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  5,674
  6,645
  7,650
  8,682
  9,727
  10,775
  11,814
  12,839
  13,843
  14,825
  15,784
  16,720
  17,637
  18,538
  19,427
  20,311
  21,196
  22,086
  22,988
  23,909
  24,854
  25,829
  26,841
  27,894
  28,995
  30,147
  31,357
  32,630
  33,969
  35,381
Total cash flow (excl. dividends), $m
  7,573
  9,148
  10,882
  12,775
  14,819
  17,005
  19,325
  21,773
  24,343
  27,028
  29,283
  32,191
  35,208
  38,336
  41,575
  44,930
  48,403
  52,001
  55,729
  59,594
  63,603
  67,766
  72,091
  76,588
  81,267
  86,138
  91,214
  96,506
  102,027
  107,789
Retained Cash Flow (-), $m
  -1,446
  -1,682
  -1,936
  -2,198
  -2,462
  -2,727
  -2,991
  -3,250
  -3,504
  -3,753
  -3,995
  -4,232
  -4,464
  -4,692
  -4,918
  -5,142
  -5,365
  -5,591
  -5,819
  -6,052
  -6,291
  -6,538
  -6,794
  -7,061
  -7,339
  -7,631
  -7,938
  -8,260
  -8,599
  -8,956
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
  6,127
  7,466
  8,946
  10,578
  12,356
  14,277
  16,335
  18,524
  20,839
  23,275
  25,287
  27,959
  30,744
  33,643
  36,658
  39,788
  43,038
  46,410
  49,909
  53,541
  57,312
  61,228
  65,297
  69,527
  73,927
  78,507
  83,276
  88,246
  93,428
  98,833
Discount rate, %
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.18
  22.24
  23.35
  24.52
  25.74
  27.03
  28.38
  29.80
  31.29
  32.85
  34.50
  36.22
PV of cash for distribution, $m
  5,631
  6,256
  6,776
  7,176
  7,434
  7,538
  7,485
  7,280
  6,936
  6,473
  5,794
  5,198
  4,564
  3,921
  3,295
  2,706
  2,171
  1,699
  1,298
  965
  699
  492
  336
  223
  143
  89
  53
  31
  17
  9
Current shareholders' claim on cash, %
  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
  100.0

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, Inc. (NFLX)

Valuation Ratios
P/E Ratio 828.7
Price to Sales 17.5
Price to Book 57.8
Price to Tangible Book
Price to Cash Flow -105.1
Price to Free Cash Flow -93.4
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 $15794 million for the last fiscal year's total revenue generated by Netflix, Inc.. The default revenue input number comes from 0001 income statement of Netflix, Inc.. 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 27.4% 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 8.8%, whose default value for NFLX is calculated based on our internal credit rating of Netflix, Inc., 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, Inc..
    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 81.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1376 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, Inc..

Corporate tax rate of 27% is the nominal tax rate for Netflix, Inc.. 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 57.4%.

Life of production assets of 2.3 years is the average useful life of capital assets used in Netflix, Inc. 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 -3.7%. 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 - $5238.765 million for Netflix, Inc. - 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 436.590 million for Netflix, Inc. 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, Inc. at the current share price and the inputted number of shares is $157.3 billion.

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