Netflix Financial Report and Financial Analysis: 2015 to 2019

Netflix Financial Report and Financial Analysis started with an in-depth review of Netflix's 10k Annual report, specifically, Netflix's income statement and balance sheet. 

Next Paul Borosky, MBA., summarized their financial information and input it into a proprietary financial model, which shows their income statement and balance sheet trends as well as calculations for Netflix's financial ratios, and financial ratio trends covering 5 years.

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Netflix Financial Report and Analysis by Paul Borosky, MBA.
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  • Summarized income statement for the last 5 years.
  • Summarized balance sheet for the last 5 years.
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  • Five year’s worth of over twenty common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
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Netflix 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. 

Netflix Income Statement Summary

Research and Development

Netflix has steadily been increasing its investment in research and development.  In the last four years, they have averaged about a 25% annual growth in this line item.  This shows that the company has ample opportunities to develop and create innovative products and services in the next several years.  However, if the organization starts to reduce their research and development, this may indicate to investors that the firm is lowering their expectations for future innovations.

Netflix Summary Income Statement 2019

Column1 2019 2018 2017 2016 2015
Revenues             20,156,447             15,794,341             11,692,713               8,830,669                 6,779,511
COGS               2,652,462               2,369,469               1,436,281               1,097,519                 4,591,476
Gross Profit             17,503,985             13,424,872             10,256,432               7,733,150                 2,188,035
SG&A                  914,369                  630,294                  431,043                  315,663                    407,329
Depreciation                            -                            -                            -                            -                             -
R & D               1,545,149               1,221,814                  953,710                  780,232                    650,788
Other                            -                            -                            -                            -
Operating Expenses               2,459,518               1,852,108               1,384,753               1,095,895                 1,058,117
EBIT               2,604,254               1,605,226                  838,679                  379,793                    305,826
Other Income                            -                            -                            -                            -
Interest Expense                  626,023                  420,493                  238,204                  150,114                    132,716
EBT               2,062,231               1,226,458                  485,321                  260,507                    141,885
Taxes                  195,315                    15,216                   (73,608)                    73,829                    141,885
Net Income             1,866,916             1,211,242                558,929                186,678                  122,641

Netflix Balance Sheet Summary

Long Term Debt

Netflix's long-term deposition has grown substantially as compared to total assets.  In 2015, the company’s long-term debt as compared to total assets was approximately 23%.  As of the end of 2019, the long-term debt as compared to total assets ballooned up to 43%.  This shows that the firm is continually relying upon debt to maintain and grow operations.  As their debt position increases, the company should expect elevated interest rates due to increased risk for the firm.

Netflix Summary Balance Sheet 2019

Column1 2019 2018 2017 2016 2015
Cash                 5,018,437             3,794,483             2,822,795             1,467,576             1,809,330
Short Term Investment                              -                         -                         -                266,206                501,385
Account Receivable                              -                         -                         -                         -                         -
Inventory                              -                         -                         -                         -                         -
Other                              -                         -                         -                         -                         -
Current Assets               6,178,504          9,694,135          7,669,974          5,720,291          5,431,840
Net PPE                    565,221                418,291                319,404                250,395                173,412
Goodwill                              -                         -                         -                         -                         -
Other                              -                         -                         -                         -                         -
Total Assets            33,975,712        25,974,400        19,012,742        13,586,610        10,202,871
Accounts Payable                    674,347                562,985                359,555                312,842                253,491
Accrued Expense                    843,043                477,417                315,094                197,632                140,389
Accrued Taxes                              -                         -                         -                         -                         -
Notes Payable                              -                         -                         -                         -                         -
LT Debt - Current                              -                         -                         -                         -                         -
Other                              -                         -                         -                         -                         -
Total Current Liabilities                 6,855,696             6,487,320             7,669,974             5,720,291             3,529,624
LT Debt               14,759,260           10,360,058             6,499,432             3,364,311             2,371,362
Other                              -                         -                         -                         -                         -
Total Liabilities            26,393,555        20,735,635        15,430,786        10,906,810          7,979,445
Common Stock                 2,793,929             2,315,988             1,871,396             1,599,762             1,324,809
Treasury                              -                         -                         -                         -                         -
Retained Earnings                 4,811,749             2,942,359             1,731,117             1,128,603                941,925
Other                              -                         -                         -                         -                         -
Total Equity               7,582,157          5,238,765          3,581,956          2,679,800          2,223,426
Total Equity & Liability            33,975,712        25,974,400        19,012,742        13,586,610        10,202,871

Netflix Financial Ratio Summary and Analysis

Cash Ratio

The organization's cash ratio has increased from .51 in 2015 to .73 and 2019.  This shows that the firm has substantial cash as compared to liabilities that may need to be paid.  Another reason to rest assured that the firm is financially liquid in 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.

Net Profit Margin

Netflix's net profit margin had increased from 1.8% in 2015 to 9.3% in 2019.  As compared to other industry competitors, the firm’s net profit margin may be considered a bit below average.  However, the growth rate is what is impressive.  The net profit margin growth rate from 2018 to 2019 was 20.7%.  For the previous year, the growth rate was 60%.  If this growth rate is sustainable, then the firm’s net profit margin will exceed the industry average in the next several years.

Netflix 2019 Liquidity Ratios

Ratios 2019 2018 2017 2016 2015
Current Ratio                           0.90                    1.49
Cash Ratio                           0.73                    0.58
Quick Ratio                           0.90                    1.49
Net Working Capital                  3,501,047           2,754,081

Netflix 2019 Asset Utilization Ratios

Ratios 2019 2018 2017 2016 2015
Total Asset Turnover                           0.59                    0.61
Fixed Asset Turnover                         35.66                  37.76
Days Sales Outstanding                              -                        -
Inventory Turnover #DIV/0! #DIV/0!
Accounts Receivable Turnover #DIV/0! #DIV/0!
Working Capital Turnover                           5.76                    5.73
AP Turnover                         29.89                  28.05
Average Days Inventory #DIV/0! #DIV/0!
Average Days Payable                           0.08                    0.08

Netflix 2019 Profitability Ratios

Ratios 2019 2018 2017 2016 2015
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%
ROCE 9.60% 8.24%
Capital Employed                27,120,016         19,487,080
ROIC 57.98% 49.97%

Netflix 2019 Long-term Debt

Ratios 2019 2018 2017 2016 2015
Debt Ratio 43.44% 39.89%
Debt/Equity 194.66% 197.76%
Times Interest Earned                           4.16                    3.82