Stock Analysis on Net

Netflix Inc. (NASDAQ:NFLX)

Economic Value Added (EVA)

Microsoft Excel

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.


Economic Profit

Netflix Inc., economic profit calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net operating profit after taxes (NOPAT)1 5,659,536 5,035,808 6,078,640 3,693,653 2,494,304
Cost of capital2 14.73% 14.41% 14.23% 14.56% 14.30%
Invested capital3 37,926,586 37,782,560 34,785,312 29,762,011 24,144,190
 
Economic profit4 72,893 (407,321) 1,128,364 (639,198) (958,563)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 5,659,53614.73% × 37,926,586 = 72,893

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Netflix Inc. economic profit decreased from 2021 to 2022 but then slightly increased from 2022 to 2023.

Net Operating Profit after Taxes (NOPAT)

Netflix Inc., NOPAT calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net income 5,407,990 4,491,924 5,116,228 2,761,395 1,866,916
Deferred income tax expense (benefit)1 (542,978) (134,527) 199,519 70,066 (94,739)
Increase (decrease) in deferred revenue2 178,308 55,319 91,350 193,247 163,846
Increase (decrease) in equity equivalents3 (364,670) (79,208) 290,869 263,313 69,107
Interest expense 699,826 706,212 765,620 767,499 626,023
Interest expense, operating lease liability4 80,194 82,512 84,434 79,267 80,662
Adjusted interest expense 780,020 788,724 850,054 846,766 706,685
Tax benefit of interest expense5 (163,804) (165,632) (178,511) (177,821) (148,404)
Adjusted interest expense, after taxes6 616,216 623,092 671,543 668,945 558,281
Net operating profit after taxes (NOPAT) 5,659,536 5,035,808 6,078,640 3,693,653 2,494,304

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in deferred revenue.

3 Addition of increase (decrease) in equity equivalents to net income.

4 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 2,430,113 × 3.30% = 80,194

5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 780,020 × 21.00% = 163,804

6 Addition of after taxes interest expense to net income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Netflix Inc. NOPAT decreased from 2021 to 2022 but then increased from 2022 to 2023 not reaching 2021 level.

Cash Operating Taxes

Netflix Inc., cash operating taxes calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Provision for income taxes 797,415 772,005 723,875 437,954 195,315
Less: Deferred income tax expense (benefit) (542,978) (134,527) 199,519 70,066 (94,739)
Add: Tax savings from interest expense 163,804 165,632 178,511 177,821 148,404
Cash operating taxes 1,504,197 1,072,164 702,867 545,709 438,458

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Netflix Inc. cash operating taxes increased from 2021 to 2022 and from 2022 to 2023.

Invested Capital

Netflix Inc., invested capital calculation (financing approach)

US$ in thousands

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Short-term debt 399,844 699,823 499,878
Long-term debt 14,143,417 14,353,076 14,693,072 15,809,095 14,759,260
Operating lease liability1 2,430,113 2,578,488 2,723,675 2,201,853 1,613,234
Total reported debt & leases 16,973,374 16,931,564 18,116,570 18,510,826 16,372,494
Stockholders’ equity 20,588,313 20,777,401 15,849,248 11,065,240 7,582,157
Net deferred tax (assets) liabilities2 (874,550) (261,541) (148,095) (589,091) (658,206)
Deferred revenue3 1,442,969 1,264,661 1,209,342 1,117,992 924,745
Equity equivalents4 568,419 1,003,120 1,061,247 528,901 266,539
Accumulated other comprehensive (income) loss, net of tax5 223,945 217,306 40,495 (44,398) 23,521
Adjusted stockholders’ equity 21,380,677 21,997,827 16,950,990 11,549,743 7,872,217
Capital work-in-progress6 (406,492) (235,555) (282,248) (298,558) (100,521)
Short-term investments7 (20,973) (911,276)
Invested capital 37,926,586 37,782,560 34,785,312 29,762,011 24,144,190

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of deferred revenue.

4 Addition of equity equivalents to stockholders’ equity.

5 Removal of accumulated other comprehensive income.

6 Subtraction of capital work-in-progress.

7 Subtraction of short-term investments.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Netflix Inc. invested capital increased from 2021 to 2022 and from 2022 to 2023.

Cost of Capital

Netflix Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 246,854,722 246,854,722 ÷ 264,302,835 = 0.93 0.93 × 15.52% = 14.49%
Senior Notes3 15,018,000 15,018,000 ÷ 264,302,835 = 0.06 0.06 × 4.73% × (1 – 21.00%) = 0.21%
Operating lease liability4 2,430,113 2,430,113 ÷ 264,302,835 = 0.01 0.01 × 3.30% × (1 – 21.00%) = 0.02%
Total: 264,302,835 1.00 14.73%

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in thousands

2 Equity. See details »

3 Senior Notes. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 162,493,678 162,493,678 ÷ 179,155,166 = 0.91 0.91 × 15.52% = 14.08%
Senior Notes3 14,083,000 14,083,000 ÷ 179,155,166 = 0.08 0.08 × 4.75% × (1 – 21.00%) = 0.29%
Operating lease liability4 2,578,488 2,578,488 ÷ 179,155,166 = 0.01 0.01 × 3.20% × (1 – 21.00%) = 0.04%
Total: 179,155,166 1.00 14.41%

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in thousands

2 Equity. See details »

3 Senior Notes. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 171,680,533 171,680,533 ÷ 192,434,208 = 0.89 0.89 × 15.52% = 13.84%
Senior Notes3 18,030,000 18,030,000 ÷ 192,434,208 = 0.09 0.09 × 4.75% × (1 – 21.00%) = 0.35%
Operating lease liability4 2,723,675 2,723,675 ÷ 192,434,208 = 0.01 0.01 × 3.10% × (1 – 21.00%) = 0.03%
Total: 192,434,208 1.00 14.23%

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in thousands

2 Equity. See details »

3 Senior Notes. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 238,543,388 238,543,388 ÷ 259,550,241 = 0.92 0.92 × 15.52% = 14.26%
Senior Notes3 18,805,000 18,805,000 ÷ 259,550,241 = 0.07 0.07 × 4.75% × (1 – 21.00%) = 0.27%
Operating lease liability4 2,201,853 2,201,853 ÷ 259,550,241 = 0.01 0.01 × 3.60% × (1 – 21.00%) = 0.02%
Total: 259,550,241 1.00 14.56%

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in thousands

2 Equity. See details »

3 Senior Notes. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 150,580,890 150,580,890 ÷ 168,143,124 = 0.90 0.90 × 15.52% = 13.90%
Senior Notes3 15,949,000 15,949,000 ÷ 168,143,124 = 0.09 0.09 × 4.88% × (1 – 21.00%) = 0.37%
Operating lease liability4 1,613,234 1,613,234 ÷ 168,143,124 = 0.01 0.01 × 5.00% × (1 – 21.00%) = 0.04%
Total: 168,143,124 1.00 14.30%

Based on: 10-K (reporting date: 2019-12-31).

1 US$ in thousands

2 Equity. See details »

3 Senior Notes. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Netflix Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit1 72,893 (407,321) 1,128,364 (639,198) (958,563)
Invested capital2 37,926,586 37,782,560 34,785,312 29,762,011 24,144,190
Performance Ratio
Economic spread ratio3 0.19% -1.08% 3.24% -2.15% -3.97%
Benchmarks
Economic Spread Ratio, Competitors4
Alphabet Inc. 19.06% 15.97% 38.25% 19.50% 18.55%
Charter Communications Inc. -0.48% -0.75% -1.78% -4.05% -5.73%
Comcast Corp. -2.31% -6.79% -1.76% -3.42% -1.37%
Meta Platforms Inc. 12.37% 6.01% 28.46% 19.67% 12.77%
Walt Disney Co. -11.47% -9.33% -12.11% -14.39% -4.20%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 72,893 ÷ 37,926,586 = 0.19%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Netflix Inc. economic spread ratio deteriorated from 2021 to 2022 but then slightly improved from 2022 to 2023.

Economic Profit Margin

Netflix Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit1 72,893 (407,321) 1,128,364 (639,198) (958,563)
 
Revenues 33,723,297 31,615,550 29,697,844 24,996,056 20,156,447
Add: Increase (decrease) in deferred revenue 178,308 55,319 91,350 193,247 163,846
Adjusted revenues 33,901,605 31,670,869 29,789,194 25,189,303 20,320,293
Performance Ratio
Economic profit margin2 0.22% -1.29% 3.79% -2.54% -4.72%
Benchmarks
Economic Profit Margin, Competitors3
Alphabet Inc. 11.74% 9.84% 21.94% 13.05% 11.51%
Charter Communications Inc. -1.18% -1.83% -4.51% -11.23% -17.23%
Comcast Corp. -4.01% -12.01% -3.47% -7.38% -2.72%
Meta Platforms Inc. 12.95% 5.25% 22.35% 18.50% 11.82%
Walt Disney Co. -22.39% -19.20% -30.86% -38.71% -10.04%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 Economic profit. See details »

2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 72,893 ÷ 33,901,605 = 0.22%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Netflix Inc. economic profit margin deteriorated from 2021 to 2022 but then slightly improved from 2022 to 2023.