Netflix Financial Statements and Financial Ratios

Netflix: Brief Summary

Netflix headquarters is located in Los Gatos, CA.  The company competes in the communications services sector—specifically, the entertainment industry.  At present, the organization employs approximately 9,400 individuals. Netflix’s main revenue generator is the sale of monthly subscriptions to its movie streaming services.  A secondary revenue generator for the firm is the rental of DVDs.

From a financial perspective, Netflix’s market capitalization is about $242 billion as of August 2021.  Their beta is .75.  This indicates that the company’s stock is slightly less risky as compared to the overall market.  Their stock price range for the last 52 weeks has been between $458.60 to $593.29.  In the last year, the company has not paid out dividends.  This indicates that the firm is still in an expansionary business cycle.

Netflix Financial Report Sources

“Netflix 2020 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 2020 10k, 2017 10k annual report, 2016 10k annual report, 2018 10k annual report, and Netflix's 2019 10k annual report as the basis for information gathering. 

 

 

Section 1: Netflix Income Statement Analyzed

In this section, I walk through a broad definition of what an income statement is and why it is important.  From this, I then discuss and define income statement line items, such as revenues, gross profits, etc., in detail.  After each line item is defined and discussed, I finally offer a summary analysis of Netflix's important income statement line item trends from 2016 to 2020, in most cases.

Netflix Revenue Growth:

Netflix’s average revenue growth rate over the last five years was approximately 26.4% annually.  However, the firm’s growth rate has been continually declining over this five-year period.  Specifically, in 2018, the organization’s revenue growth was 35.1%.  As of 2021, the firm’s revenue growth was 18.8% from the previous year.  This decline indicates that the organization may be entering a more mature phase of its business cycle.  From this, continued revenue declines should be expected.  From an investor’s perspective, this is a below-average trend.

Analyst Grade: B

Netflix 2021 Summary Income Statement
Column1	2021	2020	2019	2018	2017
Revenues	29,697,844	24,996,056	20,156,447	15,794,341	11,692,713
COGS	17,332,683	15,276,319	12,440,213	9,967,538	7,659,666
Gross Profit	12,365,161	9,719,737	7,716,234	5,826,803	4,033,047
SG&A	1,351,621	1,076,486	914,369	630,294	431,043
Depreciation	208,412	115,710	103,579	83,157	71,911
R & D	2,273,885	1,829,600	1,545,149	1,221,814	953,710
Other	-	-	-	-	-
Total Operating Expenses	3,833,918	3,021,796	2,563,097	1,935,265	1,456,664
EBIT	6,194,509	4,585,289	2,604,254	1,605,226	838,679
Other Income	-	-	-	-	-
Interest Expense	765,620	767,499	626,023	420,493	238,204
EBT	5,840,103	3,199,349	2,062,231	1,226,458	485,321
Taxes	723,875	437,954	195,315	15,216	(73,608)
Net Income	5,116,228	2,761,395	1,866,916	1,211,242	558,929

 

 

Section 2: Netflix Balance Sheet Analyzed

For Netflix's balance sheet, I again go through each important line item from the balance sheet.  In reviewing each line item, I will define Netflix's balance sheet line item, such as cash, property, plant and equipment, and liabilities between 2016 to 2020.  Next, I then offer a summary analysis of Netflix’s important balance sheet line items.

Netflix Cash.

Netflix’s cash position was $2.8 billion in 2017.  Over the next four years, the organization’s cash position would increase substantially, ending 2021 at $6 billion.  As compared to sales, the organization’s cash percentage was 24.1% in 2017.  In 2021, the cash, as compared to the sales, dropped to 20.3%.  This shows that the firm is holding less cash on hand as compared to the sales over this time span.  From an investor’s perspective, this is actually a good trend.  This shows that the company is not sitting idle on access cash.

Analyst Grade: A

Netflix 2021 Summary Balance Sheet
Column1	2021	2020	2019	2018	2017
Cash	6,027,804	8,205,550	5,018,437	3,794,483	2,822,795
Short Term Investment	-	-	-	-	-
Account Receivable	-	-	-	-	-
Inventory	-	-	-	-	-
Other	-	-	-	-	-
Current Assets	8,069,825	9,761,580	6,178,504	9,694,135	7,669,974
Net PPE	1,323,453	960,183	565,221	418,291	319,404
Goodwill	-	-	-	-	-
Other	-	-	-	-	-
Total Assets	44,584,663	39,280,359	33,975,712	25,974,400	19,012,742
Accounts Payable	837,483	656,183	674,347	562,985	359,555
Accrued Expense	1,449,351	1,102,196	843,043	477,417	315,094
Accrued Taxes		-	-	-	-
Notes Payable	699,823	499,878	-	-	-
LT Debt - Current	-	-	-	-	-
Other	-	-	-	-	-
Total Current Liabilities	8,488,966	7,805,785	6,855,696	6,487,320	7,669,974
LT Debt	14,693,072	15,809,095	14,759,260	10,360,058	6,499,432
Other	-	-	-	-	-
Total Liabilities	28,735,415	28,215,119	26,393,555	20,735,635	15,430,786
Common Stock	4,024,561	3,447,698	2,793,929	2,315,988	1,871,396
Treasury	824,190	-	-	-	-
Retained Earnings	12,689,372	7,473,144	4,811,749	2,942,359	1,731,117
Other	-	-	-	-	-
Total Equity	15,849,248	11,065,240	7,582,157	5,238,765	3,581,956

 

Section 3: Netflix Financial Ratios Analyzed

For this section, I have chosen several different financial ratios to review for Netflix from 2016 to 2020.  In reviewing each of Netflix’s financial ratios, I first start with defining the financial ratio.  Next, I supply the financial formula for calculating the specific ratio.  Finally, I offer a brief analysis of Netflix’s Important Financial ratios. 

Netflix Current Ratio

Netflix’s current ratio was 1.0 in 2017.  In the next several years, the organization’s current ratio would fall slightly to .95.  The reduction in the current ratio, especially since the organization generates cash continuously, should be well received by investors.  This shows that the firm is able to cover its current liabilities with less cash and other current assets on hand.

Analyst Grade: A

Netflix Total Asset Turnover

Netflix’s total asset turnover was .61 in 2017.  Over the next several years, the firm’s total asset turnover would increase slightly to .67.  This trend indicates that the firm is doing a slightly better job in using assets under management to generate revenues.  However, because of the slow growth in this area, investors should be wary when the organization increases its property, plant, and equipment category at a faster pace as compared to sales.  From an investor’s perspective, this trend is above average.

Analyst Grade: B