Netflix created a model for the future of television when it launched in 1997. It is an over-the-top (OTT) internet streaming media provider comparable to Amazon Prime's Instant Video, Hulu, and YouTube. The company has 283 million global subscribers and generated roughly $28.75 billion in revenue for the nine months ending Sept. 30, 2024.

What Is an Income Statement?

The income statement is one of the three key financial statements produced to evaluate the financial condition of a company—the other two being the balance sheet and the cash flow statement. A company's income statement presents investors and analysts wܫith a picture of its overall profitability and financial health by outlining its revenue and expenses.

Other key information included on an inc💝ome st💜atement include:

• 澳洲幸运5官方开奖结果体彩网:Cost of Goods Sold (COGS): This figure relates to all the direct costs associated with the production of goods and services, such as raw materials and labor.
• Gross Profit: This is the difference between a company's revenue and COGS.
• Income: Income is divided between different types, including operating income and 澳洲幸运5官方开奖结果体彩网:net income.
  

Information from the income statement is typically a major focus whenever a company reports its quarterly and annual earnings. It can be broken down into three parts: direct, indirect, and capital. Revenue is the top-line sales for the company during the reporting period. It is the most direct aspect of the income statement and immediately provides an assessment of the company’s marketꦇplace performance.

You can find any public company's income statement in a number of its financial filings. These include 10-Q reports filed every quarter and the annual report, which is called the 10-K. It may also be included in a company's 8-K, which is filed whenever a company makes a major announcement or update.

Netflix's Income Statement

Netflix (NFLX) reported revenue of $28.75 for the first nine months of 2024. The company's cost of revenue (or cost of goods sold) came in at about $15.27 billion, leaving it with gross profit for the nine months of $13.48 billion. This equates to a gross profi💝t margin of a🅘bout 47%.

Netflix's indirect costs, which include 澳洲幸运5官方开奖结果体彩网:marketing, technology and development, and general and administrative, appear to be spread across all of its revenue. The company appeared to increase marketing and technology/development costs between its first nine months of 2024 compared to the same period in 2023, with the largest increase coming from its marketing efforts. If we subtract the indirect costs from the company's gross profit, we end up with its operating income, which was $8.14 billion. That's a 49% increas🎀e from the same period in 2023.

Now, let's look at the capital portion of the income statement. This section of the income statement can get quite tricky since companies may report both 澳洲幸运5官方开奖结果体彩网:generally accepted accounting principles (GA𓆏AP) and non-GAAP earnings, which may require certain adjustments to arrive at a non-GAAP EPS. Netflix does not appear to have any adjustments. From EBIT, Netflix subtracts interest paid on debt for capital expenditures, interest earned on invested capital, and taxes.

After including interest and tax, Netflix reported total net income of $2.36 billion. Using 澳洲幸运5官方开奖结果体彩网:diluted shares outstanding of 437,898, this results in about $5.40 of 🍒EPS. Keep in mind that net income growth can often be a better gauge of the company’s performance th⛦an EPS since EPS changes with company share management, but both are generally used.

Analyzing Netflix's Income Statement

Revenue for the first three quarters of 2024 increased by 15%, net income has increased by 189%, and EPS has increased by 185%. These all show that Netflix remains in a strong growth phase. Net income for the period increased by 53% and the company's EPS (diluted) grew by 57%.

Two key valuation measures that we can look at after analyzing the income statement include the 澳洲幸运5官方开奖结果体彩网:price-to-sales (P/S) ratio and the 澳洲幸运5官方开奖结果体彩网:price-to-earnings (P/E) ratio. As of Jan. 16, 2025, Netflix's P/S and P/E ratio were 10.03 and 48.41. This means that investors are willing to pay $10.03 per dollar of revenue per share that the company earns and $48.41 for each dollar of the company's💖 earnings.

The chart below shows the P/S and P/E for the FAANG group:

Analysts predict strong growth for Netflix going into the near term. Despite changes to its pricing structure and adding ads to its streaming service, the company's shares have been resilient while it increases the number of paid subscribers. Analysts also point to the company's ability to manage 澳洲幸运5官方开奖结果体彩网:operational efficiencies while making smart moves when it comes to its content spending. The company's share price continues to reach new highs with the potential of reaching $1,000 per share.

The Bottom Line

Netflix built itself from an online DVD rental service into one of the world's most recognizable entertainment companies. Even though it raised prices and added ads to its service, it continues to expand its subscriber base, which makes it poised to continue to grow—a boon to investors who seek big returns for their investments. If you're a new investor looking to cash in on Netflix's success (or any other company), it's important to do your due diligence and research to see if it makes sense. One way to do that is to analyze the income statement and read what analysts are saying to determine whether the company has the growth potential you seek.