Is Netflix (NFLX) Stock a Buy?
Netflix (NFLX -1.16%) has been the best-performing stock in my portfolio over several decades. It has averaged an annual gain of 28.6% over the past 15 years, enough to turn a $1,000 investment into one worth more than $43,000. (By comparison, the S&P 500 averaged very solid annual gains of 14% over the same period, enough to turn $1,000 into around $7,262.) While looking back is very nice, investors should be more interested in looking forward: Is Netflix a buy now?
Image source: The Motley Fool.
Let’s take a look. First, if you just assess a few rough valuation measures, the stock seems somewhat undervalued to fairly valued. For example, its price-to-sales ratio was recently 6.3, just a smidge below its five-year average of 6.5, and its recent forward-looking price-to-earnings (P/E) ratio of 18 is well below its five-year average of 30.
Today’s Change
(-1.16%) $-0.79
Current Price
$67.06
Key Data Points
Market Cap
Day’s Range
$66.75 – $67.87
52wk Range
$65.08 – $124.86
Volume
38.7M
Avg Vol
37.2M
Gross Margin
49.53%
But valuation alone is not sufficient to make an investment decision. How the business is doing is also very important.
Netflix has grown into a giant in the streaming world, but it’s arguably fairly mature at this point and may not grow as quickly as it did in the past. In its second-quarter report, revenue was up 13.4% year over year to $12.9 billion, but that’s a slower growth rate than in recent quarters. Net income was up 9%. Still, its huge base of more than 325 million subscribers worldwide (as of the end of 2025) is generating a lot of income that can be used to create or acquire more content that will serve existing subscribers and perhaps attract more subscribers. It’s an attractive business model.
The company does have some serious competition, though, including Amazon‘s Prime Video, Apple‘s Apple TV, and Alphabet‘s YouTube. But competition isn’t necessarily a deal-breaker. Coca-Cola and PepsiCo have coexisted profitably for decades.
All in all, Netflix isn’t terribly compelling at recent levels. Buying a little could serve you well over the long haul, but you can find more attractive opportunities.
Selena Maranjian has positions in Alphabet, Amazon, Apple, and Netflix. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Netflix. The Motley Fool has a disclosure policy.
