A Business Management Case in Strategic Stock Analysis

Are you a DVD-hire junkie? Can you imagine life without a new movie every day? Or are you a multiplex die-hard? Will you come on-board when Netflix Incorporated (NASDAQ: NFLX) offers streaming video through the Internet. Do you believe in the Recreational Activities Industry stocks at all?

Hiring movies can divide the best of friends. It is not like cold fusion, nanoparticles, or plasma proteins. Everyone has an opinion about renting movies. You have to buy stocks or sell them. There is no fence-sitting when it comes to the vital matter of your entertainment.

This is the stuff of case studies. Business schools use them all the time. There are no right answers, just reasoning and discussions. Do you own NFLX stock? Tell us why or why not. Here are some facts you can use:

  • 52-week stock price range: $40.90-15.62
  • Price to Earnings Ratio: over 30
  • Five-year sales growth rate: more than 50%
  • Five-year capital spending growth rate: almost 60%
  • Trailing Twelve Months Gross Margin: 33.62
  • Five-year average Return on Equity: 15.92
  • Most Recent Quarter results have met market expectations
  • Management expects tough conditions during the rest of 2008
  • The company continues to gain new subscribers
  • The company loses subscriptions as well.
  • Prominent competitors: HBO, Amazon, and Wal-Mart

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