Netflix Operating Margin Climbs to 29.7%, Driving 49.6% EPS CAGR
AAPL•Netflix's operating margin rose from 16.8% three years ago to 29.7% over the past twelve months, reflecting sustained operating leverage. This margin expansion supported a 49.6% annual EPS growth despite a 13.7% revenue CAGR, while its 25.8 P/E ratio sits near the decade-low.
1. Operating Margin Expansion
Netflix's operating margin climbed from 16.8% three years ago to 22.5% two years ago, 27.7% last year and now stands at 29.7% over the trailing twelve months, demonstrating consistent operating leverage and improved profitability.
2. Earnings Growth Outpacing Revenue
This steady margin lift contributed to a compounded 49.6% annual EPS growth over the past three years, far exceeding the 13.7% revenue CAGR in the same period.
3. Cost Management and Content Spending
Management has balanced billions in content, live sports and gaming investments with pricing discipline, exemplified by walking away from the Warner Bros. deal when terms threatened profitability.
4. Valuation Highlights
The stock trades at a P/E multiple of 25.8, near the low end of its 10-year range of 15.3 to 285.0, indicating limited investor premium for its sustained profitability.
