NASDAQ:NFLX—A High-Growth Stock Gearing Up for Its Next Upward Move.

Growth investors are on the lookout for stocks displaying robust revenue and EPS growth. In this analysis, we'll assess whether NETFLIX INC (NASDAQ:NFLX) aligns with growth investing criteria, especially as it consolidates and signals a possible breakout. As always, investors should conduct their own research, but NETFLIX INC has surfaced on our radar for growth with base formation, warranting further examination.

A Closer Look at Growth for NASDAQ:NFLX

ChartMill assigns a Growth Rating to each stock, ranging from 0 to 10. This rating is determined by analyzing different growth elements, including EPS and revenue growth, spanning both historical and future figures. In the case of NASDAQ:NFLX, the assigned 8 reflects its growth potential:

• The Earnings Per Share has grown by an impressive 70.39% over the past year.
• 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 13.00%.
• Measured over the past years, NFLX shows a quite strong growth in Revenue. The Revenue has been growing by 16.38% on average per year.
• NFLX is expected to show a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 24.29% yearly.
• The Revenue is expected to grow by 10.95% on average over the next years. This is quite good.

Analyzing Health Metrics

ChartMill assigns a Health Rating to every stock. This score ranges from 0 to 10 and evaluates the different health aspects like liquidity and solvency, both absolutely, but also relative to the industry peers. NASDAQ:NFLX scores a 7 out of 10:

• NFLX has an Altman-Z score of 8.74. This indicates that NFLX is financially healthy and has little risk of bankruptcy at the moment.
• The Altman-Z score of NFLX (8.74) is better than 97.14% of its industry peers.
• The Debt to FCF ratio of NFLX is 2.05, which is a good value as it means it would take NFLX, 2.05 years of fcf income to pay off all of its debts.
• NFLX has a better Debt to FCF ratio (2.05) than 84.29% of its industry peers.
• Although NFLX does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
• NFLX does not score too well on the current and quick ratio evaluation. However, as it has excellent solvency and profitability, these ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

How do we evaluate the Profitability for NASDAQ:NFLX?

ChartMill assigns a proprietary Profitability Rating to each stock. The score is computed by evaluating various profitability ratios and margins and ranges from 0 to 10. NASDAQ:NFLX was assigned a score of 9 for profitability:

• With an excellent Return On Assets value of 14.45%, NFLX belongs to the best of the industry, outperforming 92.86% of the companies in the same industry.
• With an excellent Return On Equity value of 32.08%, NFLX belongs to the best of the industry, outperforming 94.29% of the companies in the same industry.
• The Return On Invested Capital of NFLX (18.37%) is better than 97.14% of its industry peers.
• Measured over the past 3 years, the Average Return On Invested Capital for NFLX is above the industry average of 9.31%.
• The last Return On Invested Capital (18.37%) for NFLX is above the 3 year average (13.36%), which is a sign of increasing profitability.
• NFLX has a Profit Margin of 19.54%. This is amongst the best in the industry. NFLX outperforms 94.29% of its industry peers.
• NFLX's Profit Margin has improved in the last couple of years.
• Looking at the Operating Margin, with a value of 23.82%, NFLX belongs to the top of the industry, outperforming 94.29% of the companies in the same industry.
• NFLX's Operating Margin has improved in the last couple of years.
• NFLX's Gross Margin has improved in the last couple of years.

Why is NASDAQ:NFLX a setup?

ChartMill takes into account not only the Technical Rating but also assigns a Setup Rating to each stock. This rating, on a scale of 0 to 10, reflects the degree of consolidation observed based on short-term technical indicators. Currently, NASDAQ:NFLX exhibits a 7 setup rating, indicating its consolidation status in recent days and weeks.

NFLX has an excellent technical rating and also presents a decent setup pattern. Prices have been consolidating lately and the volatility has been reduced. A pullback is taking place, which may present a nice opportunity for an entry. There is a resistance zone just above the current price starting at 695.73. Right above this resistance zone may be a good entry point. Another positive sign is the recent Pocket Pivot signal.

More Strong Growth stocks can be found in our Strong Growth screener.

Our latest full fundamental report of NFLX contains the most current fundamental analsysis.

For an up to date full technical analysis you can check the technical report of NFLX

Keep in mind

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.