NASDAQ:NFLX, a strong growth stock, setting up for a breakout.

In this article we will dive into NETFLIX INC (NASDAQ:NFLX) as a possible candidate for growth investing. Investors should always do their own research, but we noticed NETFLIX INC showing up in our strong growth, ready to breakout screen, which makes it worth to investigate a bit more.

Exploring NASDAQ:NFLX's Growth

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:

• NFLX shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 76.35%, which is quite impressive.
• Measured over the past years, NFLX shows a very strong growth in Earnings Per Share. The EPS has been growing by 34.98% on average per year.
• The Revenue has grown by 14.80% in the past year. This is quite good.
• 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.
• 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.
• Based on estimates for the next years, NFLX will show a quite strong growth in Revenue. The Revenue will grow by 10.95% on average per year.

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 8.73 indicates that NFLX is not in any danger for bankruptcy at the moment.
• NFLX's Altman-Z score of 8.73 is amongst the best of the industry. NFLX outperforms 98.59% of its industry peers.
• The Debt to FCF ratio of NFLX is 2.24, which is a good value as it means it would take NFLX, 2.24 years of fcf income to pay off all of its debts.
• Looking at the Debt to FCF ratio, with a value of 2.24, NFLX belongs to the top of the industry, outperforming 83.10% of the companies in the same industry.
• 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's Profitability Rating offers a unique perspective on stock analysis, providing scores from 0 to 10. These ratings consider a wide range of profitability metrics and margins, both in comparison to industry peers and on their own merits. For NASDAQ:NFLX, the assigned 8 is a significant indicator of profitability:

• With an excellent Return On Assets value of 14.88%, NFLX belongs to the best of the industry, outperforming 92.96% of the companies in the same industry.
• NFLX has a better Return On Equity (34.25%) than 95.77% of its industry peers.
• The Return On Invested Capital of NFLX (19.19%) is better than 95.77% of its industry peers.
• The last Return On Invested Capital (19.19%) for NFLX is above the 3 year average (13.36%), which is a sign of increasing profitability.
• The Profit Margin of NFLX (20.70%) is better than 95.77% of its industry peers.
• NFLX's Profit Margin has improved in the last couple of years.
• NFLX has a better Operating Margin (25.65%) than 94.37% of its industry peers.
• NFLX's Operating Margin has improved in the last couple of years.
• In the last couple of years the Gross Margin of NFLX has grown nicely.

How do we evaluate the setup for NASDAQ:NFLX?

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 8 setup rating, indicating its consolidation status in recent days and weeks.

Besides having an excellent technical rating, NFLX also presents a decent setup pattern. We see reduced volatility while prices have been consolidating in the most recent period. There is a resistance zone just above the current price starting at 763.90. Right above this resistance zone may be a good entry point. There is a support zone below the current price at 718.96, a Stop Loss order could be placed below this zone.

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

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

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

Disclaimer

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.