When you just look at share price, Netflix stock is one of the most expensive trading on the market today.
Netflix shares rank No. 240 among the most expensive stocks that trade in the United States, according to Finviz. The Netflix stock price has climbed 130% in 2015, opening at $112.85 today. Netflix held a stock split in July that brought its share price down from over $700 to about $100.
Shares trading over $100 sound pricey - but to really measure if Netflix stock is too expensive right now, you have to look at the following numbers...
How to Measure the Real Value of the Netflix Stock Price (Nasdaq: NFLX)
But it's important to remember that even though stock splits lower the share price, they do not change the stock's valuation.
For that we look to the price/earnings ratio (P/E ratio). The trailing P/E ratio compares share price to earnings per share over the last four quarters.
The P/E ratio is basically how much an investor is spending to receive one dollar of that company's earnings. The higher the ratio, the more you spend for a piece of profit. High P/E ratios typically mean investors expect future growth.
Right now, Netflix stock has a trailing P/E ratio of 251.3, according to Yahoo! Finance.
Major tech competitors like Apple Inc. (Nasdaq: AAPL) and Google Inc. (Nasdaq: GOOGL) have dramatically lower valuations. Apple has a share price of $110.82 and a trailing P/E of 13. Google's share price is much higher at $674, but the P/E ratio is 32.
Netflix stock's forward P/E ratio - which uses forecasted earnings instead of the last four quarters - is also extremely high at 351.4. Apple and Google have forward P/E ratios of 11.4 and 20.3, respectively.
Another good barometer for a stock's value is its price/earnings to growth (PEG) ratio. A PEG ratio of 1.0 is considered fair value for a company. Right now, Netflix has a PEG ratio of 36.1. Apple and Google have PEG ratios of just 0.83 and 1.4.
For many investors, Netflix stock looks too expensive for their portfolios. We asked Money Morning Defense & Tech Specialist Michael A. Robinson if there was any value in Netflix stock now - here's his take...
Should I Buy Netflix Stock Now?
Netflix stock is a good buy for investors who can handle risk and who are looking for growth.
Robinson said Netflix is one of the best growth stocks on the market.
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"Netflix is seeking to become the preeminent provider of content globally," Robinson said. "Right now, they are going through an Amazon.com Inc. (Nasdaq: AMZN) style growth period. It's the Bezos model - build, build, build - then the profits will follow."
Just look at the company's growth trajectory. It's estimated that the company now has roughly 69 million global subscribers. This time last year, it had just over 53 million. In October 2014, it was just 40 million. If you go all the way back to October 2012, the total was 29 million.
"And the fact they are able to raise subscription prices on new subscribers means they are confident in their growth ability, and their ability to add new subscribers," Robinson said.
But Netflix isn't for everyone. Not only is Netflix stock expensive, it's also very volatile. After all, we did see a 20% sell-off in August.
Netflix stock is also volatile following earnings. Netflix will report Q3 earnings on Wednesday, Oct. 14.
"They are in a period of global growth, and I like it at this price near $114," Robinson explained. "But the risk there is that it's been volatile lately. The next couple of quarters may be dicey for Netflix stock because of the stock market, and this stock's personality is that it periodically goes through sell-offs. If you can hang in and go through any volatility, you can be okay with Netflix stock long term."
In the last five years, the Netflix Inc. (Nasdaq: NFLX) stock has climbed an incredible 425%. The Dow Jones Industrial Average is up just 55% in the same time.
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