Name of the company: Netflix
Leverage and Coverage Ratios
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Most Recent Fiscal Year
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Fiscal Year
(-1)
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Fiscal Year
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Fiscal Year
(-3)
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Debt/Equity
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Debt/Assets
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Interest Expense/Long term Debt
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Times Interest Earned (TIE)
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Interest Coverage
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a. What trends, if any, are apparent in these ratios?
b. Are these favourable or unfavourable to the shareholders?
c. Are these favourable or unfavourable to the debt holders?
d. The debt/equity ratio from I-Matrix is based on book values. If you were to compute the ratio on the basis of market values, would this ratio tend to be higher or lower than on the basis of book values? Why?
Growth Rates
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Most Recent Fiscal Year
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Fiscal Year
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Fiscal Year
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Fiscal Year
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Annual Revenue Growth
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Annual Net Income Growth
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Annual Free Cash Flow Growth
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a. What trends, if any, are obvious in these ratios?
b. Hypothetically, is it probable for sales to rise while net income declines? Why or why not?
c. Hypothetically, is it probable for net income to decline while free cash flow rises? Why or why not?
Distribution Policies
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Most Recent Fiscal Year
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Fiscal Year
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Fiscal Year
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Fiscal Year
(-3)
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Dividend/Share
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Dividend Yield
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Payout Ratio
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a. Based on this data, define the firm’s dividend policy in the precedent four years. Is this policy suitable for the firm? Why or why not?
b. Would you suggest any change of policy for this firm? Why or why not?
c. The firm’s distributions comprise share repurchases as well as cash dividends. Refer to the firm’s statement of cash flows to find data on the total dollar amount of dividends paid and shares repurchased, and report the results below. You will also need to calculate distributions as percent of net income.
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Most Recent Fiscal Year
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Fiscal Year
(-1)
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Fiscal Year
(-2)
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Fiscal Year
(-3)
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Dividends paid
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Share repurchases
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Net income
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Distribution Ratio
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Distribution Ratio
d. Does this change your view of firm’s dividend policy? Would you suggest any change of policy for this firm? Why or why not?
Part4. Comparison to a Competing Firm
Competing firm: Dish network
4-1. what is the name of competitor?
a. Which exchange is its stock traded on?
b. What is ticker symbol of this firm’s stock?
c. In which manners is this competitor firm a good match or basis of comparison for your firm?
d. In which manners is it not a better match?
4-2. Report this summary data on leverage for your firm and its competitor.
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Your Firm
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The Competitor Firm
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Debt/Equity
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Debt/Assets
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Interest Expense/Long term Debt
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Times Interest Earned (TIE)
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Interest coverage
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a. Does it come into sight to you that your firm has an appropriate degree of leverage, or is over-or under leveraged? Why?
b. What changes in leverage, if any, do you think would be appropriate for your firm to reduce its WACC?
4-3. Comparison of the firms’ liquidity and operations: First, report this summary data on liquidity and activity for the two firms:
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Your Firm
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The Competitor Firm
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Liquidity
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Current Ratio
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Quick Ratio
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Activity
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Average collection period (ACP)
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Inventory Days
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Operating Cycle
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Cash Conversion Cycle
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Total Asset Turnover
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Capital Expenditure/Sales
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SG&A/Sales
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a. Does your firm's liquidity compare favourably or unfavourably to those of the competitor? What areas of improvement, if any, are required by your firm?
b. How does your firm's operations, as evaluated by the activity ratios, compare? What areas of improvement, if any, are needed by your firm?
4-4. Analysts’ earnings estimates. On Mergent Horizon, find and report the subsequent these data for your firm. If there are any missing estimates, indicate "na."
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Comparison of Earnings Forecasts
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Your Firm
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The Competitor
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Earnings per share for the firm's current fiscal year
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Ending date of the current fiscal year
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Mean estimate of earnings per share for this year
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Low estimate
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High estimate
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Number of analysts
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EPS for the firm's next fiscal year
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Ending date of the next fiscal year
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Mean estimate of earnings per share for this year
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Low estimate
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High estimate
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Number of analysts
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Long term growth rates
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Mean estimate for the next 5 years
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Low estimate
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High estimate
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Number of analysts
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a. Consider ranges of earnings estimates in these three cases relative to mean estimates. What does this recommend about the reliability and conviction of these estimates?
b. Which of these two firms has the better outlook based on these projections? Why?
c. Do these forecasts look rational to you? Too optimistic or pessimistic? Why?