Netflix (NASDAQ:NFLX) stock has delivered extraordinary returns for shareholders over the past three, five, and 10 years. Those gains have been fueled by growth in its subscribers, revenue, and profits.

The entertainment titan is benefiting from a worldwide shift in consumer preference toward streaming content and away from cable TV. With such incredible shareholder returns already in the rearview mirror, potential investors could reasonably ask if it's too late to buy Netflix stock. Let's see.

Adults and child watching television.

Netflix is trading at its lowest price-to-earnings ratio in years. Image source: Getty Images.

Netflix has plenty of room to keep growing 

At the end of the third quarter, Netflix boasted 214 million streaming subscribers globally. That was up 9.4% from the same time last year. The coronavirus pandemic forced hundreds of millions of people to find ways of entertaining themselves at home. One of the most obvious choices was a subscription to Netflix. At less than $20 per month for the most premium version, it can entertain a family at home for less than $1 per day.

That excellent customer value proposition was highlighted during the pandemic, to be sure. However, it's a terrific value even during non-pandemic times. Otherwise, Netflix could not have reached over 200 million subscribers and sustained this level even as economies reopened. 

Moreover, Netflix members can view its content on mobile devices outside their homes, a feature not available to traditional cable viewers. So not only is Netflix priced less than cable TV, but it is also more user-friendly. That suggests Netflix could continue gaining share from cable companies. As of September, Netflix's share of U.S. viewing time stood at 6% while cable's was at 38%, according to Nielsen.

Looking out worldwide, Netflix CFO Spencer Neumann estimates there are 1 billion pay-TV households. Against that opportunity, Netflix is offering a superior product that is more user-friendly and at a better price. That suggests Netflix can keep growing for at least several more years.

Is Netflix stock too expensive? 

With Netflix's stock up 6,550% over the past 10 years, the understandable question comes to mind: Is the stock too expensive? I am going to argue it is not. Hear me out.

Netflix is trading at a forward price-to-earnings ratio of 58, the lowest it has sold for since 2014. Notably, the bargain arises because the denominator is rising along with the numerator. From 2015 to 2020, Netflix's earnings per share have grown from $0.28 to $6.08 -- a more than 20-fold increase.

Rising profits are a result of a powerful flywheel at Netflix that is showing no signs of slowing. Increasing membership totals generate more revenue, which in turn increases the amount Netflix can spend on content. Fresh and exciting content attracts and retains members, which then generates even more revenue. 

Yes, investors are looking at a significantly higher price for Netflix stock than three, five, or 10 years ago. However, they are also getting better value when measured by earnings. So to answer my question: no, it's not too late to buy Netflix stock

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.