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Netflix Piotroski F-Score

: 3 (As of Today)
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Warning Sign:

Piotroski F-Score of 3 is low, which usually implies poor business operation.

The zones of discrimination were as such:

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Netflix has an F-score of 3. It is a bad or low score, which usually implies poor business operation.

NAS:NFLX' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 8
Current: 3

2
8

During the past 13 years, the highest Piotroski F-Score of Netflix was 8. The lowest was 2. And the median was 5.


Netflix Piotroski F-Score Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Netflix Annual Data
Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18
Piotroski F-Score Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 5.00 3.00 2.00 4.00 4.00

Netflix Quarterly Data
Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19
Piotroski F-Score Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 4.00 4.00 3.00 2.00 3.00

Competitive Comparison
* 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.


Netflix Piotroski F-Score Distribution

* The bar in red indicates where Netflix's Piotroski F-Score falls into.


How is the Piotroski F-Score calculated?

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep19) TTM:Last Year (Sep18) TTM:
Net Income was 133.934 + 344.052 + 270.65 + 665.244 = $1,414 Mil.
Cash Flow from Operations was -1235.072 + -379.799 + -543.754 + -501.794 = $-2,660 Mil.
Revenue was 4186.841 + 4520.992 + 4923.116 + 5244.905 = $18,876 Mil.
Gross Profit was 1117.591 + 1650.378 + 1917.459 + 2146.986 = $6,832 Mil.
Average Total Assets from the begining of this year (Sep18)
to the end of this year (Sep19) was
(23366.229 + 25974.4 + 27218.632 + 30171.339 + 30941.711) / 5 = $27534.4622 Mil.
Total Assets at the begining of this year (Sep18) was $23,366 Mil.
Long-Term Debt & Capital Lease Obligation was $12,426 Mil.
Total Current Assets was $5,328 Mil.
Total Current Liabilities was $7,258 Mil.
Net Income was 185.517 + 290.124 + 384.349 + 402.835 = $1,263 Mil.

Revenue was 3285.755 + 3700.856 + 3907.27 + 3999.374 = $14,893 Mil.
Gross Profit was 805.067 + 1400.277 + 1504.839 + 1587.028 = $5,297 Mil.
Average Net Income from the begining of last year (Sep17)
to the end of last year (Sep18) was
(16951.54 + 19012.742 + 20152.797 + 22663.537 + 23366.229) / 5 = $20429.369 Mil.
Total Assets at the begining of last year (Sep17) was $16,952 Mil.
Long-Term Debt & Capital Lease Obligation was $8,337 Mil.
Total Current Assets was $8,730 Mil.
Total Current Liabilities was $6,298 Mil.

Profitability

Question 1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by Total Assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Netflix's current Net Income (TTM) was 1,414. ==> Positive ==> Score 1.

Question 2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by Total Assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Netflix's current Cash Flow from Operations (TTM) was -2,660. ==> Negative ==> Score 0.

Question 3. Change in Return on Assets

Compare this year's return on assets (1) to last year's return on assets.

Score 1 if it's higher, 0 if it's lower.

ROA (This Year)=Net Income/Total Assets(Sep18)
=1413.88/23366.229
=0.06050955

ROA (Last Year)=Net Income/Total Assets(Sep17)
=1262.825/16951.54
=0.07449618

Netflix's return on assets of this year was 0.06050955. Netflix's return on assets of last year was 0.07449618. ==> Last year is higher ==> Score 0.

Question 4. Quality of Earnings (Accrual)

Compare Cash flow return on assets (2) to return on assets (1)

Score 1 if CFROA > ROA, 0 if CFROA <= ROA.

Netflix's current Net Income (TTM) was 1,414. Netflix's current Cash Flow from Operations (TTM) was -2,660. ==> -2,660 <= 1,414 ==> CFROA <= ROA ==> Score 0.

Funding

Question 5. Change in Gearing or Leverage

Compare this year's gearing (long-term debt divided by average total assets) to last year's gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Sep19)=Long-Term Debt & Capital Lease Obligation/Total Assetsfrom Sep18 to Sep19
=12425.746/27534.4622
=0.45127978

Gearing (Last Year: Sep18)=Long-Term Debt & Capital Lease Obligation/Total Assetsfrom Sep17 to Sep18
=8336.586/20429.369
=0.4080687

Netflix's gearing of this year was 0.45127978. Netflix's gearing of last year was 0.4080687. ==> Last year is lower than this year ==> Score 0.

Question 6. Change in Working Capital (Liquidity)

Compare this year's current ratio (current assets divided by current liabilities) to last year's current ratio.

Score 1 if this year's current ratio is higher, 0 if it's lower

Current Ratio (This Year: Sep19)=Total Current Assets/Total Current Liabilities
=5327.758/7257.9
=0.7340633

Current Ratio (Last Year: Sep18)=Total Current Assets/Total Current Liabilities
=8729.981/6298.24
=1.3860985

Netflix's current ratio of this year was 0.7340633. Netflix's current ratio of last year was 1.3860985. ==> Last year's current ratio is higher ==> Score 0.

Question 7. Change in Shares in Issue

Compare the number of shares in issue this year, to the number in issue last year.

Score 0 if there is larger number of shares in issue this year, 1 otherwise.

Netflix's number of shares in issue this year was 451.6. Netflix's number of shares in issue last year was 451.9. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

Efficiency

Question 8. Change in Gross Margin

Compare this year's gross margin (Gross Profit divided by sales) to last year's.

Score 1 if this year's gross margin is higher, 0 if it's lower.

Gross Margin (This Year: TTM)=Gross Profit/Revenue
=6832.414/18875.854
=0.36196582

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=5297.211/14893.255
=0.35567853

Netflix's gross margin of this year was 0.36196582. Netflix's gross margin of last year was 0.35567853. ==> This year's gross margin is higher. ==> Score 1.

Question 9. Change in asset turnover

Compare this year's asset turnover (total sales for the year divided by total assets at the beginning of the year) to last year's asset turnover ratio.

Score 1 if this year's asset turnover ratio is higher, 0 if it's lower

Asset Turnover (This Year)=Revenue/Total Assets at the Beginning of This Year (Sep18)
=18875.854/23366.229
=0.80782629

Asset Turnover (Last Year)=Revenue/Total Assets at the Beginning of Last Year (Sep17)
=14893.255/16951.54
=0.87857829

Netflix's asset turnover of this year was 0.80782629. Netflix's asset turnover of last year was 0.87857829. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=1+0+0+0+0+0+1+1+0
=3

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Netflix has an F-score of 3. It is a bad or low score, which usually implies poor business operation.

Netflix  (NAS:NFLX) Piotroski F-Score Explanation

The developer of the system is Joseph D. Piotroski is relatively unknown accounting professor who shuns publicity and rarely gives interviews.

He graduated from the University of Illinois with a B.S. in accounting in 1989, received an M.B.A. from Indiana University in 1994. Five years later, in 1999, after earning a Ph.D. in accounting from the University of Michigan, he became an associate professor of accounting at the University of Chicago.

In 2000, he wrote a research paper called "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" (pdf).

He wanted to see if he can develop a system (using a simple nine-point scoring system) that can increase the returns of a strategy of investing in low price to book (referred to in the paper as high book to market) value companies.

What he found was something that exceeded his most optimistic expectations.

Buying only those companies that scored highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 led to an average out-performance over the market of 13.4%.

Even more impressive were the results of a strategy of investing in the highest F-Score companies (8 or 9) and shorting companies with the lowest F-Score (0 or 1).

Over the same period from 1976 to 1996 (20 years) this strategy led to an average yearly return of 23%, substantially outperforming the average S&P 500 index return of 15.83% over the same period.


Netflix Piotroski F-Score Related Terms


Netflix Piotroski F-Score Headlines

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