What is Netflix WACC %?
As of today (2024-09-12), Netflix's weighted average cost of capital is 14.67%%. Netflix's ROIC % is 16.41% (calculated using TTM income statement data). Netflix generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases.
For a comprehensive WACC calculation, please access the WACC Calculator.
Netflix WACC % Historical Data
The historical data trend for Netflix's WACC % can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
* Premium members only.
Netflix WACC % Chart
Netflix Annual Data | ||||||||||||||||||||
Trend | Dec14 | Dec15 | Dec16 | Dec17 | Dec18 | Dec19 | Dec20 | Dec21 | Dec22 | Dec23 | ||||||||||
WACC % | Get a 7-Day Free Trial | 11.68 | 6.42 | 5.15 | 9.96 | 13.97 |
Netflix Quarterly Data | ||||||||||||||||||||
Sep19 | Dec19 | Mar20 | Jun20 | Sep20 | Dec20 | Mar21 | Jun21 | Sep21 | Dec21 | Mar22 | Jun22 | Sep22 | Dec22 | Mar23 | Jun23 | Sep23 | Dec23 | Mar24 | Jun24 | |
WACC % | Get a 7-Day Free Trial | 13.18 | 13.95 | 13.97 | 14.60 | 15.29 |
Competitive Comparison of Netflix's WACC %
For the Entertainment subindustry, Netflix's WACC %, along with its competitors' market caps and WACC % data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Netflix's WACC % Distribution in the Media - Diversified Industry
For the Media - Diversified industry and Communication Services sector, Netflix's WACC % distribution charts can be found below:
* The bar in red indicates where Netflix's WACC % falls into.
Netflix WACC % Calculation
The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Generally speaking, a company's assets are financed by debt and equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances.
WACC | = | E | / | (E + D) | * | Cost of Equity | + | D | / | (E + D) | * | Cost of Debt | * | (1 - Tax Rate) |
1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today, Netflix's market capitalization (E) is $292518.602 Mil.
The market value of debt is typically difficult to calculate, therefore, GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding the latest one-year quarterly average and together. As of Jun. 2024, Netflix's latest one-year quarterly average Book Value of Debt (D) is $14766.6718 Mil.
a) weight of equity = E / (E + D) = 292518.602 / (292518.602 + 14766.6718) = 0.9519
b) weight of debt = D / (E + D) = 14766.6718 / (292518.602 + 14766.6718) = 0.0481
2. Cost of Equity:
GuruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)
a) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated daily. The current risk-free rate is 3.67%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected excess market returns. Netflix's beta is 1.92.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
Cost of Equity = 3.67% + 1.92 * 6% = 15.19%
3. Cost of Debt:
GuruFocus uses latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.
As of Jun. 2024, Netflix's interest expense (positive number) was $740.847 Mil. Its total Book Value of Debt (D) is $14766.6718 Mil.
Cost of Debt = 740.847 / 14766.6718 = 5.017%.
4. Multiply by one minus TTM Tax Rate:
GuruFocus uses the most recent TTM Tax Expense divided by the most recent TTM Pre-Tax Income to calculate the tax rate. The calculated TTM tax rate is limited to between 0% and 100%. If the calculated tax rate is higher than 100%, it is set to 100%. If the calculated tax rate is less than 0%, it is set to 0%.
The latest calculated TTM Tax Rate = 1090.859 / 8185.634 = 13.33%.
Netflix's Weighted Average Cost Of Capital (WACC) for Today is calculated as:
WACC | = | E / (E + D) | * | Cost of Equity | + | D / (E + D) | * | Cost of Debt | * | (1 - Tax Rate) |
= | 0.9519 | * | 15.19% | + | 0.0481 | * | 5.017% | * | (1 - 13.33%) | |
= | 14.67% |
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Netflix(NAS:NFLX) WACC % Explanation
Because it costs money to raise capital. A firm that generates higher ROIC % than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.
As of today, Netflix's weighted average cost of capital is 14.67%%. Netflix's ROIC % is 16.41% (calculated using TTM income statement data). Netflix generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases.
Be Aware
1. GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding latest one-year quarterly average and together.
For companies that report quarterly, GuruFocus combines all of the most recent year's quarterly debt data from the beginning of the year to the year-end and calculates the average.
For companies that report semi-annually, GuruFocus combines all of the most recent year's semi-annual debt data from the start of the year to the year-end and calculates the average.
For companies that report annually, GuruFocus combines the beginning and ending annual debt data from the most recent year and then calculates the average.
2. The WACC formula discussed above does not include Preferred Stock. Please adjust if preferred stock is considered.
3. (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
4. GuruFocus uses the latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.
Related Terms
Netflix Business Description
Industry
GURUFOCUS.COM »STOCK LIST »Communication Services » Media - Diversified » Netflix Inc (NAS:NFLX) » Definitions » WACC %
Comparable Companies
DIS LYV WBD FWONA FOXA NWSA WMG SIRI ROKU TKO XAMS:UMG XPAR:BOL XPAR:VIV XTER:EVD EDR PARA XPAR:ODET TSE:9602 XKRX:352820 MSGS
Traded in Other Exchanges
NFLX:Peru NFLX:Mexico 1NFLX:Italy NFCd:UK 0QYI:UK NFC1:Germany NFC:Germany NFC:Germany NFC:Germany NFLX:Canada NFLX34:Brazil NFC:Bulgaria NFLX:Austria NFLX:Argentina
Address
121 Albright Way, Los Gatos, CA, USA, 95032
Website
Netflix's relatively simple business model involves only one business, its streaming service. It has the biggest television entertainment subscriber base in both the United States and the collective international market, with almost 250 million subscribers globally. Netflix has exposure to nearly the entire global population outside of China. The firm has traditionally avoided live programming or sports content, instead focusing on on-demand access to episodic television, movies, and documentaries. The firm recently began introducing ad-supported subscription plans, giving the firm exposure to the advertising market in addition to the subscription fees that have historically accounted for nearly all its revenue.
Executives
Reed Hastings | director, 10 percent owner, officer: CEO, other: CEO | 121 ALBRIGHT WAY, LOS GATOS CA 95032 |
Ann Mather | director | |
Gregory K Peters | officer: Intl. Development Officer | C/O NETFLIX, INC., 121 ALBRIGHT WAY, LOS GATOS CA 95032 |
Richard N Barton | director | C/O IAC, 152 WEST 57TH STREET, NEW YORK NY 10019 |
David A Hyman | officer: General Counsel | C/O NETFLIX, INC., 121 ALBRIGHT WAY, LOS GATOS CA 95032 |
Theodore A Sarandos | officer: Chief Content Officer | C/O NETFLIX, INC, 121 ALBRIGHT WAY, LOS GATOS CA 95032 |
Jay C Hoag | director | 250 MIDDLEFIELD ROAD, MENLO PARK CA 94025 |
Timothy M Haley | director | 3000 SAND HILL ROAD, 2-290, MENLO PARK CA 94025 |
Jeffrey William Karbowski | officer: Chief Accounting Officer | 121 ALBRIGHT WAY, LOS GATOS CA 95032 |
Kenneth A Barker | officer: Chief Accounting Officer | C/O ELECTRONIC ARTS INC., 209 REDWOOD SHORES PARKWAY, REDWOOD CITY CA 94065 |
Dicus Marian Lee | officer: Chief Marketing Officer | 526 WEST 111TH STREET, APARTMENT 3C, NEW YORK NY 10025 |
Meabe Sergio Ezama | officer: Chief Talent Officer | 59 HILLSIDE ROAD, GREENWICH CT 06830 |
Jessica Neal | officer: Chief Talent Officer | 100 WINCHESTER CIRCLE, LOS GATOS CA 95032 |
Strive Masiyiwa | director | 265 FRANKLIN STREET, BOSTON MA 02110 |
John Bozoma Saint | officer: Chief Marketing Officer | 9255 SUNSET BLVD 2ND FLOOR, LOS ANGELES CA 90069 |
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