In depth Look At Netflix And Banks Earnings

A Calm Look at Netflix's Valuation

With Netflix reporting earnings on Thursday, I thought it would be a good time to do a quick valuation exercise.

Looking at analysts' estimates, the company is expected to generate EPS of $4.60 by 2028.

Using that estimate and today's share price of $74, here's where the stock could trade by the end of 2028 under different P/E multiples:

1️⃣ 21x P/E: $97, or an 11% CAGR
2️⃣ 22x P/E: $101, or a 13% CAGR
3️⃣ 23x P/E: $105, or a 15% CAGR
4️⃣ 25x P/E: $115, or a 19% CAGR

In other words, if the stock continues to trade around a 23x P/E and Netflix delivers on analysts' expectations, the shares could reach $105, implying an average annual return of 15%.

Even with a more conservative 21x P/E, the expected annual return would still be around 11%.

Of course, past performance does not guarantee future results!

What do you think? Is Netflix attractive at $74?

The Big Six U.S. Banks Keep Breaking Records

The six largest U.S. banks just delivered their highest combined net profits on record.

Over the past six years, the strongest average annual earnings growth has come from:

JP Morgan
Goldman Sachs
Morgan Stanley

The same trend is reflected in one of the most important banking profitability metrics, ROTCE (Return on Tangible Common Equity):

JP Morgan: 24%
Goldman Sachs: 24%
Morgan Stanley: 23%

Those are outstanding returns.

That said, their strong growth has also pushed valuations higher. Based on price-to-book value (P/B), these three banks now trade at more than 2x book value, making them significantly more expensive than in the past.

On the positive side, all of the major banks continue returning capital to shareholders through growing dividends and share buyback programs.