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Netlifx Drops 12%: How Expensive Is The Stock Compared To The Rest Of FANG?

Netlifx Drops 12%: How Expensive Is The Stock Compared To The Rest Of FANG? - Netflix, Inc. NASDAQ:NFLX, Apple Inc. NASDAQ:AAPL

For the second straight quarter, the market was not impressed by Netflix, Inc. NFLX 2.06%’s subscriber growth numbers and the stock sold off by more than 12 percent. Netflix is now more than 37 percent down from its all-time highs, but has the decline made it a value compared to its FANG rivals Facebook Inc FB 0.54%, Apple Inc. AAPL 0.1% and Alphabet Inc GOOGL 0.88%? Here’s a look at the numbers.

The PEG ratio is an indication of how much value the market is giving to a company’s earnings when growth is factored in. This is how the FANG stocks stack up in terms of five-year projected PEG:

  • Facebook: 0.9
  • Apple: 1.3
  • Alphabet: 1.3
  • Netflix: 9.2

Clearly, based simply on income and growth, Netflix’s stock is far from cheap.

Related Link: Think The Market Is Overvalued? These 7 Stocks Beg To Differ

Another common valuation metric used to evaluate stocks is the price-to-free-cash-flow ratio, or P/FCF. Free cash flow is the cash that a company generates after capital expenditures are subtracted out.

  • Apple: 12.6
  • Alphabet: 29.1
  • Facebook: 51.4
  • Netflix: N/A

Netflix is the only FANG company that hasn’t generated positive cash flow over the past four quarters, another bad sign.

Finally, profit margin is a metric that is often used to assess the efficiency of a business and the growth potential of a stock. Profit margins are the percentage of each dollar in revenue that ends up as net income for a company.

  • Facebook: 23.7 percent
  • Apple: 22.2 percent
  • Alphabet: 21.8 percent
  • Netflix: 1.7 percent

Once again, Netflix is the low man on the totem pole.

It’s been a tough fall for Netflix shareholders so far in 2016 after the stock was the top performer in the entire S&P 500 in 2015. However, in order for Netflix shares to change their trajectory, the company is going to have to deliver better subscriber growth numbers and/or find ways to improve the metrics above.

Disclosure: the author holds no position in the stocks mentioned.

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