Netflix Earnings Preview: High Valuation, Extended Margins Make Stock a Risky Bet
As several companies gear up to share their quarterly earnings today, all eyes are on Netflix (NASDAQ:NFLX).
To understand how Netflix is positioned before the upcoming report, we're using our latest tool: ProTips.
Exclusive to InvestingPro subscribers, ProTips gives quick, straightforward info to simplify understanding an asset's history, helping you spot risks and trends without getting into complicated calculations.
Whether you're a beginner or an experienced trader, ProTips makes it easy.
So, when looking into a company, especially with earnings around the corner, it's smart to check out ProTips. In this article, we'll guide you through the process by evaluating the top-performing bank heading into earnings season.
As seen in the image below, ProTips is warning investors about Netflix's high valuation as we approach earnings.
This has brought today's bar higher for the company, meaning that any slip could cause a potentially large drop.
As seen in the chart below from ProTips, the company's price-to-book is 9.6X of the competition.
Source: InvestingPro
Even worse so, Netflix's EV-to-EBIDTA is 34X higher than its peers.
In fact, thanks to the extended EBIT and EBITDA margins, as well as the high price-to-earnings and price-to-book metrics (as shown by ProTips), markets are having to bank on robust figures in today's quarterly report. For instance:
Nonetheless, the company does retain a number of positive indicators, albeit fewer in comparison to the negative ones.
Looking at the data, most of the positive signs come from momentum indicators rather than fundamental factors. These indicators suggest that the company has managed to achieve good profitability despite challenges tied to economic slowdowns in key markets
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