In a sliding market, Netflix has defied the odds, trading up to $924.52 per share. Its 30% gain since October 2024 has outpaced the S&P 500’s 1.7% drop. This performance may have investors wondering how to approach the situation.

Is now still a good time to buy NFLX? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.

Why Are We Positive On NFLX?

Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.

1. Global Streaming Paid Memberships Skyrocket, Fueling Growth Opportunities

As a subscription-based app, Netflix generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.

Over the last two years, Netflix’s global streaming paid memberships, a key performance metric for the company, increased by 12.4% annually to 301.6 million in the latest quarter. This growth rate is strong for a consumer internet business and indicates people love using its offerings.

2. EBITDA Margin Reveals a Well-Run Organization

Investors regularly analyze operating income to understand a company’s profitability. Similarly, EBITDA is a common profitability metric for consumer internet companies because it excludes various one-time or non-cash expenses, offering a better perspective of the business’s profit potential.

Netflix has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer internet business, boasting an average EBITDA margin of 25.7%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

3. Increasing Free Cash Flow Margin Juices Financials

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, Netflix’s margin expanded by 18.2 percentage points over the last few years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Netflix’s free cash flow margin for the trailing 12 months was 17.7%.

Final Judgment

These are just a few reasons why we're bullish on Netflix, and with its shares beating the market recently, the stock trades at 31.3× forward EV-to-EBITDA (or $924.52 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.

Stocks We Like Even More Than Netflix

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.