Over the past six months, Netflix’s shares (currently trading at $71.76) have posted a disappointing 10.2% loss, well below the S&P 500’s 8.3% gain. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Following the drawdown, is this a buying opportunity for NFLX? Find out in our full research report, it’s free.
Why Are We Positive on NFLX?
Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.
1. Global Streaming Paid Memberships Skyrocket, Fueling Growth Opportunities
As a subscription-based app, Netflix generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.
Over the last two years, Netflix’s global streaming paid memberships, a key performance metric for the company, increased by 15.1% annually. This growth rate is among the fastest of any consumer internet business and indicates its offerings have significant traction. 
2. EBITDA Margin Reveals a Well-Run Organization
EBITDA is a good way of judging operating profitability for consumer internet companies because it excludes various one-time or non-cash expenses (depreciation), providing a more standardized view of the business’s profit potential.
Netflix has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer internet business, boasting an average EBITDA margin of 31.2%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
3. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Netflix’s EPS grew at 50% compounded annual growth rate over the last three years, higher than its 14.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons Netflix is a high-quality business worth owning. After the recent drawdown, the stock trades at 16.8× forward EV/EBITDA (or $71.76 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.
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