The stock market keeps pushing upward, as evidenced by the fresh all-time highs that the S&P 500 benchmark reached last week. Even so, many high-quality stocks are trading lower these days as market makers continue to shy away from the high fliers of the coronavirus lockdown era, moving back to ultra-safe value stocks and other low-risk assets instead.

In my view, one stock stands head and shoulders above the rest right now. Here are the top three reasons why Netflix (NFLX -1.56%) strikes me as the single best stock to buy today, in light of Tuesday's second-quarter earnings report.

A cartoon-style rocket takes off from an outstretched hand.

Image source: Getty Images.

1. There are many chapters left in Netflix's growth story

If you think that Netflix is running out of rocket fuel, I'm afraid you're doing it wrong. Global paid memberships rose 8.4% year over year in the second quarter. Coupled with a 10.2% increase in average revenue per user, top-line sales surged 19.4% higher. Further down the income statement, Netflix's operating income rose by 36% and earnings per share jumped 87% higher. You should also consider the fact that this report is compared to the most intense period of coronavirus-boosted growth in 2020. Any increase at all against that backdrop is a victory. This growth engine is alive and well.

Looking ahead, Netflix's management team expects video-streaming services to replace cable TV and terrestrial broadcast stations as the leading source of video-based entertainment. That future is still a long way away. Consider this infographic from the second-quarter report, and you'll see that even the largest streaming services can't compare to the eyeball-magnet powers of traditional TV options:

Pie chart showing that Netflix holds a 7% market share for US TV-viewing hours.

Image source: Netflix Q2 letter to shareholders.

According to this Nielsen data, Netflix commands just 7% of the TV-watching time per day. That's in the maturing domestic market. Even when lumped together with leading streaming services from Walt Disney, Amazon.comAlphabet, and others, the streaming gang only adds up to a 27% market share. There's a lot of territory left to cover here, and the opportunity for long-term growth is even larger in international markets where Netflix and friends hold smaller slices of the market pie.

So the bulk of the future growth will come from overseas subscriber additions. Meanwhile, Netflix is stirring new services into the mix with the launch of gaming services as a free add-on. I hear echoes of the original video-streaming launch, where DVD-mailer subscribers were given the fledgling digital service for free at first.

2. The balance sheet has firmed up

Netflix will execute these growth plans from a rock-solid financial platform.

  • The company has $7.8 billion of cash equivalents on hand.
  • Netflix is not planning to add any more debt at this point, because free cash flows will be strong enough to run the business from this point on.
  • The long-term debt tally stands at $14.9 billion today, down from an all-time high of $15.8 billion at the end of 2020. That's right -- Netflix is already paying down its debt balances.
  • The company is so serious about this newfound financial stability that it has introduced a stock buyback program, setting aside a cool $5.5 billion for repurchases over the next few years.

This is unfamiliar ground for Netflix, in a pleasant way. The company has been burning cash in the video-streaming era and keeping the lights on by adding several helpings of new debt. Those days of fiscal uncertainty are over, giving Netflix a strong platform from which it can explore all sorts of potentially costly business ideas.

3. The stock is undervalued today

That's ridiculous, right? I can't call Netflix "undervalued" when the stock is trading at 53 times trailing earnings. That's not how value investing works!

Except, you forget that Netflix nearly doubled its earnings year over year. You get what you pay for in this high-octane growth stock. In the long run, Netflix's growing bottom-line profits balance out the skyrocketing share price -- and then some. The stock has gained roughly 500% over the last five years. At the same time, the price-to-earnings ratio shrank by 80%:

NFLX Chart

NFLX data by YCharts

Try as I might, I can't find a better deal than Netflix right now. We are still watching the early days of a future entertainment industry powerhouse, and the stock should continue to treat us shareholders well for many years to come. You haven't missed the boat yet, but the returns will be greater the earlier you climb aboard.

That's how long-term investing works.