Is Netflix Stock Cheap Enough Yet?
Investors have watched Netflix (NFLX) stock lose 40% over the past twelve months, a period where the S&P 500 returned 17.1%. The shares are still sliding, down 7.6% in just the last three months. Furthermore, company executives acknowledged in an interview reported on October 1, 2026, that Netflix is not growing as fast as it wants. Is it still too early to buy, or does today’s price already allow for slower growth?
You Pay For Netflix’s Widest Margin In A Decade
The current valuation accounts for slower growth only if Netflix maintains its profit margin, which it has managed to do so far. The stock currently trades at 21.4 times earnings. That sits almost exactly in line with the S&P 500’s 21.5 multiple and rests near the bottom of Netflix’s own ten-year range of 15.3 to 285 times. However, the stock trades at 24.4 times operating cash flow, above the 14.4 multiple of the broader index.
The catch is that these earnings come from the widest margin Netflix has recorded in ten years. The company posted a 29.7% operating margin over the last twelve months, up from 17.5% three years ago. Paying an earnings multiple this low for a margin this high represents a bargain only if the margin lasts.
Recent figures show the margins have lasted. Netflix reported an operating margin of 33.4% for the second quarter of 2026, and its forecast for the pending third quarter is 33.2%. Executives also forecast content expense up about 10% in 2026.
Netflix Is Growing More Slowly Than It Was
Sales expansion is the metric that has failed to keep pace. Sales grew 13.4% from a year earlier in the second quarter of 2026, down from the 17.6% pace recorded two quarters before. Growth has fallen in both quarters since, and Netflix has guided 12% for the third quarter.
Wall Street analysts expect about $13.1 billion of revenue for that quarter, above the $12.86 billion Netflix guided. This suggests the current share price assumes the company will beat its own forecast, even during a period of slowing growth.
During the company’s July 16, 2026 call, executives noted that third-quarter growth would come from more memberships, higher prices, and higher ad revenue. They also indicated that view hours grew 2% in the first half of 2026, framing the figure as a slight acceleration from 1.5% growth in 2025.
Netflix Stock Has Fallen After Five Straight Earnings Releases
Netflix is scheduled to report its third quarter 2026 results on October 20, 2026. History shows a tough recent trend for the stock following earnings. Shares fell after each of the last five reports (dating back to July 2025), dropping by between 3.2% and 12.0% over the two trading days that followed. The stock has not seen a positive post-earnings reaction since April 2025.
Furthermore, matching the market’s earnings multiple does not tell you how far the stock can fall in a rough market. During the 2022 inflation shock, Netflix lost 72%, against 24% for the S&P 500.
Ultimately, the margin has held up while sales growth has faltered. If growth comes in under the 12% Netflix guided, it would show sales still slowing, meaning buying now would have been too early. Conversely, third-quarter sales at or above the $13.1 billion analysts expect would be the result that makes waiting too late.
How To Act On NFLX?
Now you know NFLX better. And that’s our purpose: to make you informed before you invest your money. However, making a bet on a single stock carries its own risks.
There is a smarter choice. Since its inception, the Trefis High Quality (HQ) Portfolio has beaten the benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000. And it did so without taking the concentrated risk that comes with do-it-yourself stock picking.
If you’d rather act on NFLX itself:
| Play Offense | Play Defense |
|---|---|
| Learn More About NFLX & Invest | Save Taxes On Capital Gain |
| Earn From NFLX Cash Secured Puts | Covered Call Against NFLX |