Netflix Inc. (NASDAQ:NFLX)

The analysis of the financial ratios over the given periods reveals several noteworthy trends in the company’s financial performance and structure.

Return on Assets (ROA)

The ROA demonstrates an overall fluctuating but generally positive trend. Initially, it increased from 9.37% in March 2021 to a peak near 11.82% in September 2021, followed by a gradual decline to around 8.36% by June 2023. After this dip, ROA exhibits a strong recovery, rising sharply to approximately 19.3% by September 2025, with a slight decrease to 18.99% in the final quarter. This suggests improving efficiency in utilizing assets to generate earnings, especially significant in the latter periods.

Financial Leverage

The financial leverage ratio shows a consistent downward trend from 3.11 in March 2021 to about 2.12 by September 2025. This steady decline indicates a reduction in the company’s reliance on debt relative to equity, suggesting an effort toward a more conservative capital structure or possibly improved equity financing. The reduction in leverage may contribute to lower financial risk.

Return on Equity (ROE)

The ROE mirrors the pattern observed in ROA but on a broader scale, reflecting both operational performance and leverage effects. The ratio initially rises from 29.18% in March 2021 to a peak above 32.98% in September 2021, then declines steadily to about 18.6% by June 2023. Subsequently, similar to ROA, it escalates dramatically, reaching a high of 41.07% in June 2025 before a slight dip to 40.19% in the last quarter.

This considerable increase in ROE in the later periods, despite a decrease in financial leverage, underscores significant improvements in profitability and operational efficiency, rather than increased leverage as a driver.

In summary, the company experienced initial growth in profitability and efficiency followed by a phase of declining returns in the early to mid-periods. However, from mid-2023 onwards, there is a marked improvement in both asset and equity returns, accompanied by a reduction in financial leverage. These trends suggest enhanced operational performance and a strengthening financial position, with a more prudent approach to debt management.

Net Profit Margin

The net profit margin displayed an upward trend overall, beginning at 14.24% in the first quarter of 2021 and declining slightly by the end of 2022 to around 14.21%. However, starting in early 2023, the margin experienced a steady increase reaching a peak of 24.58% in the third quarter of 2025. Minor fluctuations were observed, but the general direction indicates improving profitability relative to revenue over the period analyzed.

Asset Turnover

The asset turnover ratio remained relatively stable with minor variations during the initial quarters, hovering around 0.66 to 0.67 up to mid-2022. There was a slight decline through late 2022 and early 2023, dropping to approximately 0.63. From the end of 2023 onward, the ratio showed a marked improvement, climbing steadily to 0.79 by the third quarter of 2025. This suggests enhanced efficiency in utilizing assets to generate revenue in the latter periods.

Financial Leverage

Financial leverage showed a consistent decline from 3.11 in early 2021 to around 2.12 by the third quarter of 2025. The steady reduction implies a gradual decrease in the use of debt relative to equity, indicating a more conservative capital structure with potentially lower financial risk over time.

Return on Equity (ROE)

The return on equity demonstrated notable variability. Starting at 29.18% in the first quarter of 2021, it peaked early in the period at nearly 33% and then began a downward trend through 2022 and early 2023, reaching a low point of approximately 18.6%. From late 2023 onwards, ROE showed a strong recovery, peaking at 41.07% in mid-2025 before slightly retreating to 40.19%. This pattern reflects fluctuations in profitability and capital efficiency but evidences substantial improvement in generating returns for shareholders in the most recent periods.

The financial data reveals several notable trends over the observed periods. The Tax Burden ratio remains relatively stable, fluctuating narrowly around the mid- to high 0.80s, indicating a consistent effective tax rate throughout the periods.

The Interest Burden ratio shows a gradual upward movement from 0.85 in early 2021 to 0.94 by late 2025. This trend suggests improving efficiency in managing interest expenses relative to earnings before interest and taxes, indicating a potential reduction in interest costs or enhanced operational performance mitigating interest impact.

The EBIT Margin exhibits some fluctuation but generally shows an increasing trend towards the end of the timeline. Starting at approximately 19.76% in early 2021, it dips to a low around 17% in 2023, then rises steadily to a peak near 29.81% by late 2025. This improvement points to better profitability and operational efficiency over time.

Asset Turnover remains fairly stable, with minor oscillations between 0.63 and 0.79. Notably, there is a slight upward trend from 0.64 in early 2023 to 0.79 by late 2025, suggesting improved asset utilization and revenue generation capability relative to asset base in the later periods.

Financial Leverage follows a declining trajectory, moving from a high of 3.11 in early 2021 down to around 2.12 by late 2025. This indicates a gradual reduction in reliance on debt financing or equity leverage, potentially lowering financial risk exposure.

The Return on Equity (ROE) demonstrates a pattern closely tied to the preceding ratios, showing a peak near 33% in late 2021 before declining to below 20% in early 2023. Subsequently, ROE rebounds strongly, reaching above 40% towards the end of the period in 2025. This reflects a recovery and significant improvement in shareholder returns, supported by rising operational efficiency and stable leverage management.

Tax Burden

Stable within mid-0.80s to 0.88 range, implying consistent tax expense relative to earnings.

Interest Burden

Gradual increase from 0.85 to 0.94, reflecting improved interest expense management or stronger operating earnings.

EBIT Margin

Initial decline followed by marked growth from 17% to nearly 30%, highlighting improved profitability.

Asset Turnover

Generally stable with slight upward movement indicating enhanced asset utilization.

Financial Leverage

Steady decrease suggesting reduced financial risk through lower leverage.

Return on Equity (ROE)

Fluctuated with a dip in early 2023, then significantly increased above 40%, indicating stronger shareholder value creation.

The financial ratios exhibit notable patterns over the examined quarters, reflecting changes in profitability, operational efficiency, and asset utilization.

Net Profit Margin

The net profit margin experienced an initial rise from 14.24% in the first quarter of 2021 to a peak around 17.64% by the third quarter of 2021. Following that peak, a gradual decline occurred through 2022, reaching a low of approximately 13.16% in the first quarter of 2023. Subsequently, the margin reversed this downward trend, showing consistent improvement from early 2023 onwards, culminating at 24.05% by the third quarter of 2025. This indicates an overall strengthening of profitability after a period of contraction.

Asset Turnover

Asset turnover remained relatively stable around 0.66-0.67 through much of 2021 and 2022, with a slight dip to 0.63 in mid-2023. From late 2023, the ratio demonstrated a steady upward trajectory, improving from 0.66 to 0.79 by late 2025. This upward trend suggests enhanced efficiency in generating revenue from assets, reflecting improved operational performance or better asset management over time.

Return on Assets (ROA)

ROA followed a somewhat similar trajectory to net profit margin, beginning at 9.37% in early 2021 and rising to a high near 11.82% later that year. A subsequent decline brought ROA down to just below 8.5% in early 2023. Thereafter, a marked recovery phase elevated ROA significantly, reaching a peak of approximately 19.3% by the third quarter of 2025. This pattern indicates an overall enhancement in the company's ability to convert assets into net income, particularly strong in recent quarters.

In summary, the analysis reveals an initial period of growth in profitability and asset efficiency through 2021, followed by a mid-cycle dip in 2022 and early 2023. From mid-2023 onwards, all three metrics—net profit margin, asset turnover, and ROA—exhibited consistent and substantial improvement. The strengthening ratios reflect increased profitability, more efficient asset use, and enhanced overall financial performance approaching late 2025.

The financial data indicates several notable trends over the analyzed periods.

Tax Burden Ratio

The tax burden ratio remains relatively stable, fluctuating narrowly between 0.85 and 0.88. This stability suggests consistent tax expense management relative to earnings before tax across the multiple quarters.

Interest Burden Ratio

The interest burden ratio shows a gradual, steady increase over time, moving from 0.85 to 0.94. This upward trend implies improved operational efficiency or a reduction in interest expense relative to earnings before interest and taxes, contributing positively to profitability.

EBIT Margin (%)

EBIT margin exhibits some fluctuations, initially peaking around 22.94% before declining towards 17.07%, then recovering significantly in later periods to reach near 29.56%. This trajectory highlights phases of margin compression followed by substantial margin expansion, indicating enhanced operational profitability in recent quarters.

Asset Turnover Ratio

Asset turnover remains relatively stable around 0.66 during the early periods, experiencing a slight decline to 0.63 and then progressively increasing to 0.79 towards the end. This pattern suggests improved efficiency in generating revenue from assets in later periods after a minor dip.

Return on Assets (ROA) (%)

ROA shows an overall upward trend, increasing from 9.37% to a peak of 19.3%, with some minor volatility including a dip to 8.36% early on. The general improvement in ROA indicates enhanced effectiveness in using assets to generate profit, aligning with the improving EBIT margin and asset turnover ratios observed.

Overall, the company demonstrates improving profitability and asset utilization over time, with particular strength in the latter periods marked by higher EBIT margins, increased asset turnover, and rising return on assets. The consistent tax burden coupled with reduced interest impact further supports this favorable financial performance trajectory.

Tax Burden Ratio

The tax burden ratio remained relatively stable over the observed periods, fluctuating in a narrow range between 0.85 and 0.88. This consistency suggests a steady effective tax rate translating to a predictable impact on net income from pre-tax profits throughout the timeline.

Interest Burden Ratio

The interest burden ratio exhibited a gradual upward trend, increasing from 0.85 in early 2021 to 0.94 by late 2025. This improvement indicates a reduction in interest expenses relative to earnings before interest and taxes (EBIT), reflecting either lower borrowing costs, debt reduction, or improved operational leverage.

EBIT Margin

The EBIT margin showed variation, starting at 19.76% in the first quarter of 2021 and rising with some fluctuations to reach a peak around 29.81% by the third quarter of 2025. Noteworthy dips occurred in late 2022 and early 2023, where margins dropped below 18%, but a strong recovery followed, with consistent margin growth throughout 2024 and into 2025. This trend signals improving operational efficiency and profitability before interest and taxes.

Net Profit Margin

The net profit margin followed a similar pattern to the EBIT margin but with slightly lower figures, starting at 14.24% in March 2021 and increasing steadily to about 24.58% by the third quarter of 2025. The margin dipped noticeably during late 2022 and early 2023, aligning with the EBIT margin downturn, but subsequently rebounded strongly, suggesting effective cost control and improved bottom-line profitability over time.