NASDAQ:NFLX is not too expensive for the growth it is showing.

Here's NETFLIX INC (NASDAQ:NFLX) for you, a growth stock our stock screener believes is undervalued. NASDAQ:NFLX is scoring impressively in terms of growth while demonstrating strong financials. On top of that, it remains attractively priced. Let's break it down further.

How do we evaluate the Growth for NASDAQ:NFLX?

ChartMill employs its own Growth Rating system for all stocks. This score, ranging from 0 to 10, is derived by evaluating different growth factors, such as EPS and revenue growth, taking into account both past performance and future projections. NASDAQ:NFLX has earned a 8 for growth:

• NFLX shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 54.95%, which is quite impressive.
• The Earnings Per Share has been growing by 34.98% on average over the past years. This is a very strong growth
• NFLX shows quite a strong growth in Revenue. In the last year, the Revenue has grown by 9.47%.
• The Revenue has been growing by 16.38% on average over the past years. This is quite good.
• Based on estimates for the next years, NFLX will show a very strong growth in Earnings Per Share. The EPS will grow by 24.29% on average per year.
• The Revenue is expected to grow by 10.95% on average over the next years. This is quite good.

Valuation Assessment of NASDAQ:NFLX

An integral part of ChartMill's stock analysis is the Valuation Rating, which spans from 0 to 10. This rating evaluates diverse valuation factors, including price to earnings and cash flows, while considering the stock's profitability and growth. NASDAQ:NFLX has received a 5 out of 10:

• Compared to the rest of the industry, the Price/Earnings ratio of NFLX indicates a somewhat cheap valuation: NFLX is cheaper than 72.37% of the companies listed in the same industry.
• 69.74% of the companies in the same industry are more expensive than NFLX, based on the Price/Forward Earnings ratio.
• Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of NFLX indicates a somewhat cheap valuation: NFLX is cheaper than 75.00% of the companies listed in the same industry.
• Based on the Price/Free Cash Flow ratio, NFLX is valued a bit cheaper than 68.42% of the companies in the same industry.
• NFLX's low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
• NFLX has an outstanding profitability rating, which may justify a higher PE ratio.
• A more expensive valuation may be justified as NFLX's earnings are expected to grow with 31.14% in the coming years.

How We Gauge Health for NASDAQ:NFLX

ChartMill assigns a proprietary Health Rating to each stock. The score is computed by evaluating various liquidity and solvency ratios and ranges from 0 to 10. NASDAQ:NFLX was assigned a score of 8 for health:

• An Altman-Z score of 8.33 indicates that NFLX is not in any danger for bankruptcy at the moment.
• NFLX has a better Altman-Z score (8.33) than 98.68% of its industry peers.
• The Debt to FCF ratio of NFLX is 2.02, which is a good value as it means it would take NFLX, 2.02 years of fcf income to pay off all of its debts.
• The Debt to FCF ratio of NFLX (2.02) is better than 85.53% of its industry peers.
• Even though the debt/equity ratio score it not favorable for NFLX, it has very limited outstanding debt, so we won't put too much weight on the DE evaluation.
• The current and quick ratio evaluation for NFLX is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

Analyzing Profitability Metrics

ChartMill assigns a Profitability Rating to every stock. This score ranges from 0 to 10 and evaluates the different profitability ratios and margins, both absolutely, but also relative to the industry peers. NASDAQ:NFLX scores a 8 out of 10:

• Looking at the Return On Assets, with a value of 13.18%, NFLX belongs to the top of the industry, outperforming 94.74% of the companies in the same industry.
• NFLX has a Return On Equity of 30.12%. This is amongst the best in the industry. NFLX outperforms 93.42% of its industry peers.
• The Return On Invested Capital of NFLX (16.47%) is better than 96.05% of its industry peers.
• The last Return On Invested Capital (16.47%) for NFLX is above the 3 year average (13.36%), which is a sign of increasing profitability.
• NFLX's Profit Margin of 18.42% is amongst the best of the industry. NFLX outperforms 94.74% of its industry peers.
• In the last couple of years the Profit Margin of NFLX has grown nicely.
• NFLX's Operating Margin of 22.54% is amongst the best of the industry. NFLX outperforms 94.74% of its industry peers.
• In the last couple of years the Operating Margin of NFLX has grown nicely.
• In the last couple of years the Gross Margin of NFLX has grown nicely.

Every day, new Affordable Growth stocks can be found on ChartMill in our Affordable Growth screener.

Check the latest full fundamental report of NFLX for a complete fundamental analysis.

Keep in mind

This article should in no way be interpreted as advice. The article is based on the observed metrics at the time of writing, but you should always make your own analysis and trade or invest at your own responsibility.