Netflix generates $9.5 billion cash flow with 24.5% margins, yet offers 0.61% earnings yield while management sells.
This framework suggests Netflix operates a wide-moat streaming monopoly generating tremendous cash, but the price requires faith in growth that even management questions through their selling.
Does Netflix have a durable competitive advantage protecting excellent returns?
This framework sees a widening moat in Netflix's margin expansion and pricing power. The business model shows defensive characteristics with counter-cyclical demand and inflation hedging properties that suggest durable advantages.
How much cash does an owner actually get to keep after maintaining the business?
Applying this lens reveals exceptional cash generation with minimal dilution. The transformation from cash-burning to $9.5 billion annual generation represents exactly the kind of earnings machine this framework values.
Are Netflix's earnings predictable and growing consistently?
This framework finds remarkable earnings predictability. The business demonstrated resilience through the ultimate stress test - maintaining growth while the stock fell 76% during rate shocks.
If you bought the entire business today, would the earnings justify the price?
Through this lens, the math is challenging - an owner receives 0.61% yield while risk-free alternatives offer 4.33%. The discount to DCF fair value provides some comfort, but this framework would demand extraordinary confidence in continued growth.
Applying this framework reveals a paradox: Netflix operates perhaps the finest cash-generating machine in entertainment, expanding margins while proving recession-resistant. Yet at 0.61% earnings yield versus 4.33% Treasuries, an owner pays 41 years of earnings for a business where management systematically reduces exposure. The operational excellence is undeniable, but the price demands growth that even insiders appear to doubt. Would you buy a business at 41x earnings when the executives who know it best are walking toward the exits?
This analysis applies Warren Buffett's published investment framework to publicly available financial data. It is not authored by, endorsed by, or affiliated with Warren Buffett. Educational purposes only. Not financial advice.