On Oct. 22, movies-by-mail pioneer Netflix
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To go beyond the numbers, read the earnings take from Fool Rick Munarriz to see why there are 7 million reasons to like Netflix.
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When the competition ends a very effective marketing campaign that it can't afford ... Netflix picks up growth right where it left off. We saw that one coming.
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Few balance sheets are as easy to read as this one. Netflix records all sales as cash, so there are no accounts receivable, and the company is debt-free. It's as close to cash accounting as a company with $1.1 billion in annual sales can get.
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Netflix grew its subscriber count by 4.2% sequentially over last quarter after reporting its first-ever sequential drop in the second quarter. The monthly churn rate pulled back 0.4 percentage points to 4.2%, and the company spent $38 in marketing for each new subscriber -- down from $44 last quarter and $45 a year ago.
(Figures in millions, except per-share data)
Income Statement Highlights
Q3 2007 |
Q3 2006 |
Change |
|
---|---|---|---|
Sales |
$294.0 |
$256.0 |
14.9% |
Net Profit |
$15.7 |
$12.8 |
23.1% |
EPS |
$0.23 |
$0.18 |
27.8% |
Diluted Shares |
68.1 |
70.3 |
(3.2%) |
Get back to basics with the income statement.
Margin Checkup
Q3 2007 |
Q3 2006 |
Change* |
|
---|---|---|---|
Gross Margin |
33.9% |
38% |
(4.1) |
Operating Margin |
7.3% |
6.7% |
0.7 |
Net Margin |
5.4% |
5% |
0.4 |
Margins are the earnings engine.
Balance Sheet Highlights
Assets |
Q3 2007 |
Q3 2006 |
Change |
---|---|---|---|
Cash + ST Invest. |
$386.2 |
$368.7 |
4.7% |
Liabilities |
Q3 2007 |
Q3 2006 |
Change |
---|---|---|---|
Accounts Payable |
$89.5 |
$82.0 |
9.1% |
Long-Term Debt |
$0.0 |
$0.0 |
N/A |
The balance sheet reflects the company's health.
Cash Flow Highlights
Q3 2007 |
Q3 2006 |
Change |
|
---|---|---|---|
Cash From Ops. |
$77.6 |
$61.5 |
26.2% |
Capital Expenditures |
$7.4 |
$5.2 |
41.7% |
Free Cash Flow |
$70.2 |
$56.2 |
24.8% |
$27.6 |
$14.3 |
92.9% |
Free cash flow is a Fool's best friend.
Competitive Context
Market Cap |
Trailing P/E Ratio |
CAPS Rating |
Bull Ratio |
|
---|---|---|---|---|
Netflix |
$1,617 |
21.3 |
** |
79% |
Blockbuster |
$1,019 |
N/A |
* |
47% |
Amazon.com |
$37,433 |
124.7 |
** |
55% |
Apple |
$150,883 |
43.2 |
*** |
88% |
Movie Gallery |
$6.6 |
N/A |
* |
8% |
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