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Netflix WACC %

:6.36% As of Today
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As of today (2021-09-25), Netflix's weighted average cost of capital is 6.36%. Netflix's ROIC % is 14.93% (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.


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 Annual Data
Trend Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20
WACC %
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 6.44 6.83 11.80 11.98 6.62

Netflix Quarterly Data
Sep16 Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21
WACC % 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 6.48 6.59 6.62 6.72 6.33

Competitive Comparison

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 WACC % Distribution

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 $262189.378 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 two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Jun. 2021, Netflix's latest two-year average Short-Term Debt & Capital Lease Obligation was $249.939 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $15284.1775 Mil. The total Book Value of Debt (D) is $15534.1165 Mil.
a) weight of equity = E / (E + D) = 262189.378 / (262189.378 + 15534.1165) = 0.9441
b) weight of debt = D / (E + D) = 15534.1165 / (262189.378 + 15534.1165) = 0.0559

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 1.47000000%. 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 0.80.
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 = 1.47000000% + 0.80 * 6% = 6.27%

3. Cost of Debt:
GuruFocus uses last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.
As of Dec. 2020, Netflix's interest expense (positive number) was $1385.94 Mil. Its total Book Value of Debt (D) is $15534.1165 Mil.
Cost of Debt = 1385.94 / 15534.1165 = 8.9219%.

4. Multiply by one minus Average Tax Rate:
GuruFocus uses the latest two-year average tax rate to do the calculation.
The latest Two-year Average Tax Rate is 11.58%.

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)
=0.9441*6.27%+0.0559*8.9219%*(1 - 11.58%)
=6.36%

* 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 6.36%. Netflix's ROIC % is 14.93% (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 two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.

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 last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.


Related Terms

Netflix Business Description

Netflix logo
Industry
Address
100 Winchester Circle, Los Gatos, CA, USA, 95032
Netflix's primary business is a streaming video on demand service now available in almost every country worldwide except China. Netflix delivers original and third-party digital video content to PCs, Internet-connected TVs, and consumer electronic devices, including tablets, video game consoles, Apple TV, Roku, and Chromecast. In 2011, Netflix introduced DVD-only plans and separated the combined streaming and DVD plans, making it necessary for subscribers who want both to have separate plans.
Executives
Hastings Reed director, officer: Co-CEO 100 WINCHESTER CIRCLE LOS GATOS CA 95032
Neumann Spencer Adam officer: Chief Financial Officer SIERRA INCOME CORPORATION 375 PARK AVE., SUITE 3304 NEW YORK NY 10152
Whetstone Rachel officer: Chief Communications Officer 185 TUSCALOOSA AVENUE ATHERTON CA 94027
Rice Susan E director 100 WINCHESTER CIRCLE LOS GATOS CA 95032
Belmer Rodolphe director 100 WINCHESTER CIRCLE LOS GATOS CA 95032
Neal Jessica officer: Chief Talent Officer 100 WINCHESTER CIRCLE LOS GATOS CA 95032
Sweeney Anne M director C/O 100 WINCHESTER CIRCLE LOS GATOS CA 95032
Peters Gregory K officer: COO and Chief Product Officer C/O NETFLIX, INC. 100 WINCHESTER CIRCLE LOS GATOS CA 95032
Hyman David A officer: Chief Legal Officer C/O NETFLIX, INC. 100 WINCHESTER CIRCLE LOS GATOS CA 95032
Sarandos Theodore A director, officer: Co-CEO & Chief Content Officer C/O NETFLIX, INC 100 WINCHESTER CIRCLE LOS GATOS CA 95032
Dopfner Mathias director C/O TIME WARNER INC. ONE TIME WARNER CENTER NEW YORK NY 10019
Kilgore Leslie J director 100 WINCHESTER CIRCLE LOS GATOS CA 95032
Haley Timothy M director 3000 SAND HILL ROAD, 2-290 MENLO PARK CA 94025
Barton Richard N director C/O IAC 152 WEST 57TH STREET NEW YORK NY 10019
Smith Bradford L director MICROSOFT CORPORATION ONE MICROSOFT WAY REDMOND WA 98052-6399

Netflix Headlines

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