NEW YORK - Netflix rose by a staggering 6.46% today as it hit a new 52 week high. The corporation stock continues to thrive on the back of record earnings. However, at some point the economics of the business will have to catch up with the current stock price. The company currently earns around $160 million for a year. But it spends most of this money on new equipment thus the company has little free cash flow. Investors are hoping that as the company grows its earnings at an even quicker rate in the future.
Currently Netflix has the business characteristics of Walmart in terms of profitability without the customer base. If the company where to get the customer base of Walmart then it would have a chance of profitability. Currently, the companies margin are small. Net income to revenue was 7%, Walmart had a ratio of 3.5%. Warren Buffet's Coca Cola has one of 25%. If a companies has poor margins its bottom line growth will continue to lag.
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