[NASDAQ: NFLX]: Netflix, like most of the other tech stocks has closed the week in negative territory. However, the company continues to grow in the media space. The company has grown over the years to become one of the largest tech companies in the world. This year, the company has topped the list of golden globe nominations for the second year running. This goes to show that Netflix has cemented its clout in the movie industry. This is an indicator that the market environment is favorable to the future growth of the company.
Therefore, for a more refined analysis on the future prospects of Netflix, it would be best to look more into internal company related fundamentals such as its profit margins and its cash position. These can give a better idea of how healthy Netflix is as an investment.
One of factors that determines the health of a business and, and a good indicator of long-term prospects is the profit margin. A company’s profit margin is an indicator of how much it makes from its sales. Netflix has a profit margin of 8.48%. This is an above average profit margin, and indicates that the company is making money off its product offerings. By maintaining a healthy profit margin, it means that the company has the money to keep investing in new ventures that can helps drive up its revenues in the future. It’s a positive aspect to Netflix going into the future.
Another interesting facet to this company is that it has a high levered free cash flow. The company has a levered free cash flow of $8.19 billion. This puts it at an advantage on a number of fronts. For starters, this strong cash position gives the company the capacity to respond effectively to competition in the market, by using its strong cash position to either buy out emerging competition or implement strategies that can effectively respond to emerging market challenges in its operating environment. On top of that, by having a strong cash position, the company is well placed to handle any extraneous challenges that may come up in the external environment. For instance, in case of a liquidity crunch, Netflix would survive it with ease because it has the finances to do so.
Netflix is also in a strong position because it is able to meet all its debt obligations with ease. This means that the risk of Netflix going under due to inability to pay debts is low. It also means that the company is in a position to raise more finances with ease, since it has the ability to repay.
A combination of all the above make Netflix a company that has the attributes of a growth and a stable stocks. As it continues to grow in dominance in the media world, the value of Netflix will possibly rise as well. It’s a company worth keeping an eye on in the next 5 to 10 years, especially if the stock market Bull Run continues.