Netflix Financial Statements and Financial Ratios Analyzed from 2015 to 2019
“Netflix 2019 Company Analysis: Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA. and owner of Quality Business Plan. In this book, the author selected Netflix's 2018 10k, 2017 10k annual report, 2016 10k annual report, 2015 10k annual report, and Netflix's 2019 10k annual report as the basis for information gathering.
Netflix: Brief Summary
Netflix stock price started 2019 at $302.01. It ended the year with a stock price of $326.78. This is a growth rate annually of 8.17%. From an investor’s perspective, this growth rate is about average as compared to overall market returns.
Netflix has not paid out dividends in the last five years. The zero dividend payment policy may be due to the company’s need for internal growth. However, over the next several years, investors should expect some type of dividends to be paid once the organization reaches the mature phase of their business cycle.
Section 1: Netflix Income Statement Analyzed 2015 to 2019
Revenue Growth: Netflix ended 2015 with revenues of approximately $6.8 billion. In 2019, the company ended the year with revenues of approximately $20.1 billion. This indicates an average annual growth rate of approximately 31.3%. Unfortunately, with new competitors entering the marketplace like Amazon and Disney, this growth rate is unsustainable. From this, an expectation of approximately 10 to 15% annual growth should be expected over the next several years.
SG&A: The SG&A has been about 4.2% of revenues, on average, over the last five years. This shows that the firm is doing an excellent job maintaining low overhead and advertising costs as compared to revenue growth.
|Netflix Summary Income Statement 2019|
|R & D||1,545,149||1,221,814||953,710||780,232||650,788|
Section 2: Netflix Balance Sheet Analyzed from 2015 to 2019
Cash: Netflix ended 2015 with approximately $1.8 billion in cash. Over the next five years, the company ballooned its cash position to approximately $5 billion. This shows that the firm is holding excess cash as compared to investing the funds in short-term investments. Unfortunately, this is not the best strategy for cash management.
Accounts Receivable and Inventory: Because Netflix does not sell products or services through other entities, the organization has no, or very little, Accounts Receivable or inventory items.
Property plant and equipment: Netflix has steadily increased its property plant and equipment over the last five years. The average growth rate is about 30% annually. This indicates that the firm needs substantial property and equipment to support its growth needs. From this assessment, investors should expect this line item to maintain its growth rate until revenue levels off.
|Netflix Summary Balance Sheet 2019|
|Short Term Investment||-||-||-||266,206||501,385|
|LT Debt - Current||-||-||-||-||-|
|Total Current Liabilities||6,855,696||6,487,320||7,669,974||5,720,291||3,529,624|
|Total Equity & Liability||33,975,712||25,974,400||19,012,742||13,586,610||10,202,871|
Section 3: Netflix Financial Ratios Analyzed from 2015 to 2019
Current Ratio: Netflix's current ratio had fallen from 1.54 in 2015 to .9 in 2019. This indicates that the firm may not have enough funds over the short term to cover short-term liabilities. However, because the organization does receive monthly installment payments from its customers, a lower current ratio should be acceptable to ensure financial liquidity over the short term.
Fixed Asset Turnover: The firm’s fixed asset turnover has fallen from 39 to 35.6. Again, Netflix is underutilizing its property and equipment. To improve upon the situation, the firm may seek to liquidate some fix assets. This action would improve the fixed asset turnover ratio. However, it would not change the total asset turnover underutilization.
Gross Profit Margin: The company’s gross profit margins have increased from 32% in 2015 to 86% in 2019. Further, in the last four years, the gross profit margin has ranged from 86% to 87.5%. This indicates that the company has found workable strategic actions to ensure the cost of goods stay within a certain, narrow range.
Debt to Equity Ratio: Netflix debt to equity ratio ended 2015 at 106%. In 2019, this ratio ballooned up to 194%. In other words, the company has doubled the usage of debt as compared to equity. This strategy is unsustainable in the short or long-term. In the near term, the organization should expect to pay higher interest rates for additional borrowed funds.
|Netflix 2019 Liquidity Ratios|
|Net Working Capital||3,501,047||2,754,081|
|Netflix 2019 Asset Utilization Ratios|
|Total Asset Turnover||0.59||0.61|
|Fixed Asset Turnover||35.66||37.76|
|Days Sales Outstanding||-||-|
|Accounts Receivable Turnover||#DIV/0!||#DIV/0!|
|Working Capital Turnover||5.76||5.73|
|Average Days Inventory||#DIV/0!||#DIV/0!|
|Average Days Payable||0.08||0.08|
|Netflix 2019 Profitability Ratios|
|Return on Assets||5.49%||4.66%|
|Return on Equity||24.62%||23.12%|
|Net Profit Margin||9.26%||7.67%|
|Gross Profit Margin||86.84%||85.00%|
|Operating Profit Margin||12.92%||10.16%|
|Basic Earning Power||7.67%||6.18%|
|Netflix 2019 Long-term Debt|
|Times Interest Earned||4.16||3.82|
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