Netflix’s stock is down 32% over the past year while its operating margin has climbed from 16.8% three years ago to 29.7% in the last twelve months. Its earnings per share have compounded at 49.6% annually over three years versus 13.7% revenue growth, with a current P/E of 25.8.
Netflix’s operating margin has climbed consistently over the past three years, rising from 16.8% to 22.5% to 27.7%, and reaching 29.7% over the trailing twelve months, demonstrating significant operating leverage.
Over the same period, earnings per share have compounded at approximately 49.6% annually, far exceeding revenue growth of 13.7%, illustrating how margin expansion drives high profit growth even with solid sales gains.
Netflix’s current price-to-earnings multiple stands at 25.8, near the low end of its 10-year range of 15.3 to 285.0, suggesting the market may undervalue its improved profitability track record.
Despite billions spent on content, live sports, and games, Netflix has maintained margin expansion, raising questions about whether this profitability momentum can continue alongside future content investments.
