With a stock price that has soared roughly five-fold over the past five years, Netflix (NFLX -1.05%) has been a major winner for investors. As a direct result of the booming streaming market, the company has had a long history of revenue growth, supported by the addition of more subscribers over time. 

What matters for prospective investors now, however, is what the future holds. Let's find out if Netflix, with its current market capitalization of $270 billion, is a worthy investment today. 

Person relaxing, eating popcorn, and watching TV.

Image source: Getty Images.

Key competitive advantages 

A great business is one that possesses a competitive advantage, a positive characteristic that allows it to stand out among peers. In Netflix's case, this advantage is found in its massive scale, thanks to being the first mover in the streaming industry. 

The management team, led by co-Founder and co-CEO Reed Hastings, knew early on that the internet was going to dramatically alter how people consumed video entertainment. Therefore, they invested heavily (aided by borrowed funds) to develop and acquire content to attract more users. This proved to be a genius strategic move, as Netflix now has close to 214 million worldwide members. 

The impressive scale is showing up in Netflix's financials as well. The company's operating margin has climbed up from mid-single-digits five years ago to over 20% today. And what was once a cash-burning enterprise is now on the verge of being a cash cow. 

Netflix will spend $17 billion in cash on content in 2021, a budget only possible because of its massive size and enormous number of subscribers. What's more, having been in the streaming industry for so long (and with so many customers) means Netflix has a huge amount of exclusive data on viewing habits, which feeds into its ability to invest in higher-quality content. No one else has access to a comparable treasure trove of viewing data.

International expansion 

Of the 4.4 million subscribers Netflix added in the most recent quarter, 4.3 million came from outside the United States and Canada. For followers of the stock, this should come as no surprise. As the more mature domestic market becomes saturated, Netflix will have to rely on international customers to drive growth in the years ahead. 

The business is so far doing extremely well at signing up overseas members. Netflix is making a big push in India, for example, by investing hundreds of millions of dollars to produce local shows and movies in the second most populated country on the planet. According to accounting giant PwC, India is the fastest-growing streaming market today. Couple this with the fact that the country is projected to have 900 million active internet users by 2025, and it's obvious that Netflix has a big opportunity ahead. 

And the monster success of shows like the Spanish crime drama Money Heist and the South Korean thriller Squid Game, both of which were developed in their respective local languages, demonstrates Netflix's adeptness at creating hit series loved by viewers on a global scale. 

An attractive valuation and financial position 

As of market close on Dec. 8, Netflix traded at a price-to-earnings (P/E) ratio multiple of 57. This might at first look like a steep price to pay, but consider that this is the lowest P/E ratio that Netflix's stock has sold for in more than nine years. The stock has done incredibly well, but the company's earnings have increased even faster, making the valuation very appealing. 

As I indicated above, Netflix is turning the corner financially, with consistently positive free cash flow (FCF) on the way.

"We anticipate being FCF positive on an annual basis in 2022 and beyond," management highlighted in the most recent Q3 shareholder letter. Investors have been waiting for this development for a long time. 

The leadership team is so confident in Netflix's current financial position that they instituted a $5 billion share buyback program earlier this year. Even more wonderful is that Netflix no longer needs to access the capital markets to run its day-to-day operations. 

These positive developments, combined with an intriguing valuation, key competitive advantages, and large international growth, make Netflix stock a solid buy right now.