Key Points
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Netflix’s stock price-to-earnings ratio has declined by 59% in the past five years.
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As a more mature business, it’s obvious that its growth will slow down in the future.
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Since it’s a category-creating enterprise known for its innovative and disruptive identity, it’s no surprise that Netflix (NASDAQ: NFLX) has been a huge winner. Despite shares currently trading 42% below their all-time high from June 2025 (as of June 18), they have still climbed 715% in the past decade.
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Netflix shares now trade at a price-to-earnings (P/E) ratio of 24.9. This multiple has come down significantly. The stock’s valuation is in line with the broader S&P 500 index.
Investors might be ready to pounce at this opportunity to own an industry-leading company at a P/E ratio that looks compelling.
The analysis should also consider the competitive landscape. Competition for eyeballs and attention has never been this intense. Whether it’s Alphabet‘s YouTube capturing more share of TV viewing time or Meta Platforms‘ Instagram taking up smartphone screens, it’s becoming a bigger challenge for Netflix to stand out in a sea of entertainment options.
It’s likely that the company’s growth will slow going forward, as it now has more than 325 million subscribers. What’s more, content costs should keep rising, especially as Netflix makes more of an effort to acquire rights to certain live events and sports.
I don’t think Netflix stock is cheap or expensive. It looks fairly valued right now after its 42% drop.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Netflix. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
