Is Netflix Stock Your Ticket to Becoming a Millionaire?

The is a disruptive and innovative category creator

Image source: Getty Images

That figure was up 81% from the 167 million reported at the end of 2019

Despite a global pandemic, supply chain bottlenecks, inflationary pressures, higher interest rates, and geopolitical and macro uncertainty, the found tremendous success

To keep growing, Netflix is expanding further into international, such as Asia and Africa

And Canada, more mature where the opportunity isn't so big anymore, the leaned on occasional price increases to keep the ball rolling

What's more, management is doing things that it previously shunned

Netflix introduced a successful ad-based subscription tier to attract price-sensitive consumers

It also put a stop to accounts that were sharing passwords

Netflix is even stepping into sports

These pivots showcase strategic nimbleness

The company's fitability is worth focusing on

This highlights the scalability of the model

Higher revenue leads to an imving bottom line, as Netflix's main expenses aren't growing at the same rate as the top line

Looking at the rest of the ing industry, it's that Netflix stands out

It's well ahead in ing, giving it the financial resources to invest in bolstering its content offerings

Expectations are high, but for a good reason This has become a dominant force in the media and entertainment landscape

It deserves credit for disrupting the legacy cable networks by leaning on expanding broadband internet penetration and its nology wess to vide a better service to viewers

But the market is fully aware of Netflix's investment merits

As a result, expectations are high, as investors view the in a very favorable light

This is when looking at Netflix's valuation

S trade at a price-to-earnings (P/E) ratio of 60

That's not cheap at all

To be fair, though, I believe it's totally reasonable for the to register double-digit earnings per (EPS) growth on an annual basis for the foreseeable future

The prediction for Netflix's bottom-line trajectory is impressive

However, I don't think it automatically makes the stock a smart buy

The valuation is too steep, creating a headwind for spective investors

Don't be surprised if the P/E ratio is lower five years from now

While the stock was undoubtedly able to generate monster wealth in the past for its longtime holders, the opportunity to achieve incredible returns going forward is limited

Neil Patel has no position in any of the stocks mentioned

The Motley Fool has positions in and recommends Netflix and Walt Disney

The Motley Fool has a disclosure policy.