Is Netflix (NFLX 0.51%) bigger than Walt Disney (DIS 0.22%)?

That's been a legitimate question In recent years. Investors want to know which entertainment company carries the bigger financial guns and the larger market footprint.

Both companies are large and successful in their own ways. Netflix is a leading streaming service, while Disney is a diversified media and entertainment company with a wide range of businesses, including theme parks, movies, and television channels. It's difficult to compare the two companies directly, as they operate in overlapping but different industries and have very different business models.

So the short-short answer to that water cooler question is, "It depends." Disney used to win these head-to-head comparisons from every angle until 2018, but the picture has been more complicated in the last five years.

I don't mind showing you a few more specific answers to that query, though.

Market cap

If someone asks you this question at a cocktail party or in the barbershop, they probably want to know about the companies' market caps. The simple answer right now is, Disney's total market value stands at $172.6 billion, overshadowing Netflix's $140.3 billion footprint. However, the streaming specialist has indeed beaten Disney's market cap from time to time in recent years:

NFLX Market Cap Chart

NFLX Market Cap data by YCharts

The two companies first switched places in the summer of 2018. Disney was embroiled in a bidding war for 21st Century Fox at the time, while Netflix raised subscription prices and added 7.4 million net new members in the first quarter. Disney reclaimed the throne at the end of the summer, when it turned out that a lot of people had been watching France win the FIFA World Cup instead of signing up for Netflix subscriptions.

The next challenge came in 2020. COVID-19 swept the world, closing theme parks and movie theaters while millions of people in coronavirus lockdowns opted for streaming media services instead. Disney+ had just been launched, but the lack of financial contributions from Disney's physical business locations outweighed the digital positives. Once again, Disney raced ahead when those shuttered parks and theaters opened their doors again.

Finally, the omicron variant of the COVID-19 virus swept the nation in November 2021, kicking off a broad bear market that's still hanging over us today. Disney's stock simply reacted to the threat of lower theme park attendance faster than Netflix was swept up in the general market panic. As always, the Netflix lead didn't last long. Slower subscriber growth turned into outright customer losses, amplifying the weight of inflationary macroeconomic pressures on Netflix's stock.

So for the most part -- including right now -- Disney tends to be larger than Netflix in terms of market value.

Enterprise value

What if we switch to enterprise value instead? This metric is based on the market cap chart we saw earlier, but the company's total debt is added to the market value while its cash balances are subtracted. The resulting value is a reasonable starting point for price negotiations, in case some even larger company wanted to buy Netflix or Disney. Lots of debt and minimal cash would raise the effective buyout price tag, and vice versa.

From this point of view, Disney tends to carry more debt than Netflix, so the gap between those charting lines grows wider:

NFLX Enterprise Value Chart

NFLX Enterprise Value data by YCharts

In this case, only the summer of 2018 saw Netflix take even a temporary lead. The House of Mouse has nearly always been the more expensive company to acquire.

Trailing revenues

Alright, the next chart isn't even competitive. Disney has always commanded much wider and deeper revenue streams than Netflix, even in the depths of coronavirus shutdowns:

NFLX Revenue (TTM) Chart

NFLX Revenue (TTM) data by YCharts

Trailing net income (earnings)

Moving down to the bottom line, the following chart speaks for itself:

NFLX Net Income (TTM) Chart

NFLX Net Income (TTM) data by YCharts

Disney was running away with this chart until the coronavirus crisis started. Right now, Netflix boasts $5 billion of unadjusted net income over the last four quarters, comfortably ahead of Disney's $3.1 billion.

Free cash flows

Finally, let's take a peek at the metric that matters most to value-minded investors. Free cash flows are a close approximation of each company's cash profits, after backing out various noncash items that affect the tax bill without reaching into Disney's or Netflix's cash reserves.

Once again, Disney had always been larger by default until COVID-19 came along:

NFLX Free Cash Flow Chart

NFLX Free Cash Flow data by YCharts

Now, both companies are generating modest and unpredictable cash flows. Netflix took the lead exactly once, during the first calendar quarter of 2021. Netflix felt so rich that it spent $480 million on stock buybacks in that quarter. That's more than double the second-largest haul of single-quarter buybacks in the company's history, and the stock repurchases quickly dropped back to zero again over the next couple of quarters.

What's the big deal?

Apart from water cooler chats and idle gossip, there's no real reason to compare Disney's and Netflix's financial metrics directly.

You could also look at their subscriber numbers, of course. Netflix reported 223 million global streaming subscribers in its most recent update. Disney+ and its Hotstar sister brand (in India and a handful of smaller countries) posted 164 million members in its most comparable reporting period. Add in Hulu's 47 million and 24 million ESPN+ customers, and you'll see a total video-streaming audience of 236 million subscribers to Disney's total collection of streaming platforms. Disney is winning that race now, but Netflix doesn't even optimize its business for maximal subscriber growth anymore.

Apples are apples, oranges are oranges, and it just doesn't make a whole lot of sense to compare Netflix's business scale to Disney's. The real takeaway here is that both stocks look like fantastic buys at today's bargain-bin share prices.