On Jan. 23, online video pioneer Netflix
- My prediction of 7.5 million subscribers proved correct -- 6% growth from the previous quarter and 18% year over year.
- On the other hand, it cost Netflix only $40.88 to attract each new customer in 2007, compared to $42.96 per head in 2006. Light marketing at the end of the year helped the company cross the finish line at just $34.60 per gross addition in the fourth quarter.
- Ponder this chain reaction: 18% more subscribers begat 21% higher sales, which in turn sired 36% fatter net profits, father of 37% EPS growth. This is one efficient business machine.
(Figures are in millions, except per-share data.)
Income Statement Highlights
FY 2007 |
FY 2006 |
Change |
|
---|---|---|---|
Sales |
$1,205.3 |
$996.7 |
20.9% |
Net Profit |
$67.0 |
$49.1 |
36.4% |
EPS |
$0.97 |
$0.71 |
36.6% |
Diluted Shares |
68.9 |
69.1 |
(0.3%) |
Get back to basics with the income statement.
Margin Checkup
FY 2007 |
FY 2006 |
Change* |
|
---|---|---|---|
Gross Margin |
34.8% |
37.1% |
(2.3) |
Operating Margin |
7.6% |
6.5% |
1.1 |
Net Margin |
5.6% |
4.9% |
0.6 |
Margins are the earnings engine.
Balance Sheet Highlights
Assets |
FY 2007 |
FY 2006 |
Change |
---|---|---|---|
Cash + Short-term Investments |
$385.1 |
$400.4 |
(3.8%) |
Content Library |
$132.5 |
$104.9 |
26.3% |
Liabilities |
FY 2007 |
FY 2006 |
Change |
---|---|---|---|
Accounts Payable |
$104.4 |
$93.9 |
11.3% |
Long-Term Debt |
$0.0 |
$0.0 |
N/A |
The balance sheet reflects the company's health.
Cash Flow Highlights
FY 2007 |
FY 2006 |
Change |
|
---|---|---|---|
Cash From Ops. |
$290.1 |
$247.9 |
17.1% |
Capital Expenditures |
$44.3 |
$27.3 |
61.9% |
Free Cash Flow |
$245.9 |
$220.5 |
11.5% |
$247.4 |
$178.8 |
38.3% |
Free cash flow is a Fool's best friend.
Competitive Context
Market Cap |
Trailing P/E Ratio |
CAPS Rating |
|
---|---|---|---|
Apple |
$122,193 |
30.5 |
*** |
Amazon.com |
$30,711 |
85.4 |
** |
Time Warner Cable |
$24,228 |
23.3 |
** |
Netflix |
$1,563 |
25.1 |
** |
Blockbuster |
$674 |
N/A |
* |
Using the latest reported numbers from Capital IQ. Keep your partners close and the competition in your vest pocket.
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