Netflix Drops 12%: How Expensive Is The Stock Compared To The Rest Of FANG?

/ July 21, 2016

For the second straight quarter, the market was not impressed byNetflix, Inc. NFLX 2.18%’s subscriber growth numbers and the stock sold off by more than 12 percent. Netflix is now more than 37 percent down from its all-time highs, but has the decline made it a value compared to its FANG rivals Facebook Inc FB 1.07%, Amazon.com Inc AMZN 0.17% and Alphabet Inc GOOGL 0.35%? Here’s a look at the numbers.

The PEG ratio is an indication of how much value the market is giving to a company’s earnings when growth is factored in. This is how the FANG stocks stack up in terms of five-year projected PEG:

  • Facebook: 0.9
  • Amazon: 2.78
  • Netflix: 9.2
  • Alphabet: 1.3

Clearly, based simply on income and growth, Netflix’s stock is far from cheap.

Another common valuation metric used to evaluate stocks is the price-to-free-cash-flow ratio, or P/FCF. Free cash flow is the cash that a company generates after capital expenditures are subtracted out.

  • Facebook: 51.4
  • Amazon: 55.67
  • Netflix: N/A
  • Alphabet: 29.1

Netflix is the only FANG company that hasn’t generated positive cash flow over the past four quarters, another bad sign.

Finally, profit margin is a metric that is often used to assess the efficiency of a business and the growth potential of a stock. Profit margins are the percentage of each dollar in revenue that ends up as net income for a company.

  • Facebook: 23.7 percent
  • Amazon: 1.03 percent
  • Netflix: 1.7 percent
  • Alphabet: 21.8 percent

Here Netflix isn’t…

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