Netflix (NASDAQ:NFLX) shares have been exceptionally successful this year, climbing approximately 25% since the beginning of January and trading close to $1,100 each. This increase can be attributed to several factors. Netflix’s financial results have been robust, driven by subscriber growth from lower-priced ad-supported plans, enforcement against password sharing, and rising advertising revenues. In Q1 2025, Netflix’s revenues surpassed projections, growing 13% to reach $10.54 billion, while earnings increased by 25% to $6.61 per share. The company has also successfully raised prices without encountering significant pushback from clients. In late January, the cost of its standard plan rose to around $18 monthly, while the premium plan increased to about $25 per month. Thus, does Netflix stock still offer good value?
We believe that the stock appears appealing yet volatile, making it a challenging choice to purchase at its current price of approximately $1110. We think there are several reasons for concern regarding NFLX stock, which renders it attractive yet highly susceptible to negative events, given that its current valuation is very high.
We reach our conclusion by assessing the current valuation of NFLX stock in relation to its operational performance over the past few years, along with its present and historical financial status. Our evaluation of Netflix based on key metrics of Growth, Profitability, Financial Stability, and Downturn Resilience indicates that the company demonstrates a very strong operational performance and financial standing, as explained below. Nonetheless, if you seek growth with less volatility than individual stocks, the Trefis High Quality portfolio provides an alternative – having outpaced the S&P 500 and delivered returns surpassing 91% since its launch.
How Does Netflix’s Valuation Compare to The S&P 500?
Considering what you pay per dollar of sales or profit, NFLX stock appears very pricey when contrasted with the overall market.
• Netflix has a price-to-sales (P/S) ratio of 12.3 compared to 2.8 for the S&P 500
• Furthermore, the company’s price-to-free cash flow (P/FCF) ratio is 65.3, in contrast to 17.6 for the S&P 500
• Additionally, it maintains a price-to-earnings (P/E) ratio of 55.2 compared to the benchmark’s 24.5
How Have Netflix’s Revenues Evolved Over Recent Years?
Netflix’s Revenues have significantly increased over the past few years.
• Netflix has experienced its top line increase at an average rate of 9.6% over the last 3 years (versus a 6.2% increase for S&P 500)
• Its revenues have grown 15.6% from $35 billion to $40 billion in the last 12 months (compared to a growth of 5.3% for S&P 500)
• In addition, its quarterly revenues grew 16.0% to $11 billion in the most recent quarter from $9.4 billion a year earlier (versus a 4.9% improvement for S&P 500)
How Profitable Is Netflix?
Netflix’s profit margins are greater than most companies in the Trefis coverage universe.
• Netflix’s Operating Income over the last four quarters was $10 billion, representing a high Operating Margin of 26.7% (compared to 13.1% for S&P 500)
• Netflix’s Operating Cash Flow (OCF) during this timeframe was $7.4 billion, signifying a moderate OCF Margin of 18.9% (compared to 15.7% for S&P 500)
• Over the last four-quarter interval, Netflix’s Net Income was $8.7 billion – indicating a high Net Income Margin of 22.3% (compared to 11.3% for S&P 500)
Is Netflix Financially Stable?
Netflix’s balance sheet appears very robust.
• Netflix’s Debt was $16 billion at the conclusion of the most recent quarter, while its market capitalization stands at $474 billion (as of 5/12/2025). This suggests a very strong Debt-to-Equity Ratio of 3.2% (compared to 21.5% for S&P 500). [Note: A lower Debt-to-Equity Ratio is preferred]
• Cash (inclusive of cash equivalents) constitutes $8.4 billion of the $52 billion in Total Assets for Netflix. This results in a strong Cash-to-Assets Ratio of 17.9% (compared to 15.0% for S&P 500)
How Resilient Is NFLX Stock During a Decline?
NFLX stock has experienced a slightly better impact than the benchmark S&P 500 index during several recent downturns. Concerned about how a market crash might affect NFLX stock? Our dashboard How Low Can Netflix Stock Go In A Market Crash? features a comprehensive analysis of how the stock has performed during and after past market crashes.
Inflation Shock (2022)
• NFLX stock dropped 75.9% from a peak of $691.69 on 17 November 2021 to $166.37 on 11 May 2022, compared to a peak-to-trough decline of 25.4% for the S&P 500
• The stock completely recovered to its pre-Crisis peak by 20 August 2024
• Since then, the stock has risen to a high of $1,156 on 4 May 2025 and currently trades at approximately $1110
Covid Pandemic (2020)
• NFLX stock declined 22.9% from a peak of $387.78 on 18 February 2020 to $298.84 on 16 March 2020, versus a peak-to-trough decline of 33.9% for the S&P 500
• The stock completely recovered to its pre-Crisis peak by 13 April 2020
Global Financial Crisis (2008)
• NFLX stock decreased 55.9% from a peak of $5.81 on 17 April 2008 to $2.56 on 27 October 2008, compared to a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 17 March 2009
Combining All The Information: Implications for NFLX Stock
In conclusion, Netflix’s performance based on the metrics highlighted above is as follows:
• Growth: Extremely Strong
• Profitability: Strong
• Financial Stability: Extremely Strong
• Downturn Resilience: Neutral
• Overall: Very Strong
Therefore, despite its extremely high valuation, the stock stands out as appealing yet volatile, reaffirming our conclusion that NFLX is a difficult stock to purchase.
Concerned about the unpredictable nature of NFLX stock? The Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has demonstrated a history of comfortably surpassing the S&P 500 over the past 4-year interval. Why is that? As a collective, HQ Portfolio stocks have yielded superior returns with lower risk relative to the benchmark index, resulting in a smoother investment experience as evidenced by HQ Portfolio performance metrics.
Read the full article here
