Buffett Brain · Research note
Score updated 25 Oct 2026 · analysis from 5 Oct 2026
NFLX· Communication Services
Netflix
Netflix's 26.6% ROIC and 29.5% operating margin signal a strong moat, but a P/E of 26.4 raises valuation concerns.
Buffett fit
Partial fit
Owner
70
Durability
98
Management
79
Price
27
Score updated 25 Oct 2026 · analysis from 5 Oct 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Communication Services stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
Owning Netflix would mean focusing on maintaining subscriber growth and content quality.
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Netflix's durability is supported by its 5-year profitability record and a 5y EPS CAGR of 36.44%.
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Netflix's management has been effective, evidenced by a share count CAGR of -1.26% and a yield of 1.21%.
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The current valuation with an earnings yield of 3.78% and yield of 3.26% is low for a Buffett-style 'no-brainer' entry point.
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- The full reasoning behind all four pillars
- The 5-year price target and the return it implies
- What would change the call
- Graham, Lynch and Greenblatt on the same stock
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
7- 1 of 26.6% is top-quintile in the sector, indicating strong capital efficiency.
- 2 of 29.5% surpasses the sector top-quintile threshold of 21.9%.
- 3EPS CAGR of 36.44% over 5 years demonstrates robust earnings growth.
- 4Interest coverage ratio of 17.4 suggests strong ability to meet debt obligations.
Concerns
7- 1 of 26.4 suggests high market expectations, risking overvaluation.
- 2 of 48.5% is below the sector top-quintile cutoff of 74.1%.
- 3Current ratio of 1.19 is below the preferred 1.5, indicating tighter liquidity.
- 4EV/Sales of 7.86 is relatively high, suggesting premium valuation.
Price history
$62.05-3.9%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Netflix provides streaming entertainment services globally, offering a wide range of TV series, films, and games. It generates revenue primarily through subscription fees, with a TTM revenue of $45.18B and net income of $10.98B. The company maintains a strong of 29.5%, indicating efficient operations. Unit economics are solid, with a net margin of 24.3%, reflecting strong profitability.
How this analysis has moved
The call has held across 6 reviews.
Sep 27, 2026 → Oct 29, 2026
What other investors would say
The same company, judged by three other documented playbooks.
Keep researching
Similar companies in Communication Services
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