NFLX ROIC Calculation

disclosure just bought into a starter position. Hope to cost average down. I had Gemini's deep research do ROIC calculations for me a few weeks ago and thought I'd share. I think when you have enough domain specific knowledge this is a great tool for valuation work. I heard a fund manager say that LLM's are as good as 1st/2nd year analysts when prompted correctly. In order to calculate ROIC for Netflix, I used the Net operating assets for the denominator from the financial statements for this because that is how Netflix accounts for content costs, and then amortizes the content over the 'useful course of life' of the content as it is watched over time. This shows us how much money is needed to produce net income in the future. The other aspects of cost of capital have fluctuated in Netflix's history due to one time tax breaks. So factoring in a more normalized tax rate into calculations is needed. NOPAT for the numerator, and invested capital in the denominator (total debt + equity) - cash. You get the return on invested capital number to look at the operational efficiency the business. 2022: $$4.79B / 29.07B = 16.5% 2022 NFLX stock had plummeted after record years, as subscriber count slightly declined. after attaining 20+ ROIC for 2020/21. Management decided to shift from subscriber growth to looking at ways to become more profitable. This is when they introduced the ad tier subscription, and cracked down on password sharing. Utilizing levers built into the subscriber base to increase revenue. 2023: $$6.05B / 27.99B = 21.6% 2023 ROIC was driven by management ability to exercise pricing power, through the new growth initiatives. 2024: $$9.11B / 29.66B = 30.7 Since 2020, Netflix has achieved a self-reinforcing loop or flywheel. It generates enough cash to: 1. Fund the largest content budget in the world ($17B+). 2. Invest in new growth initiatives (Gaming, Ad Tech, Live Sports). 3. Repurchase stock (reducing the share count and boosting EPS). 4. Maintain a pristine balance sheet.