Is Netflix (NFLX) Stock a Buy?

Netflix (NFLX -1.16%) has been the best-performing stock in my portfolio over several decades. It has averaged an annual gain of 28.6% over the past 15 years, enough to turn a $1,000 investment into one worth more than $43,000. (By comparison, the S&P 500 averaged very solid annual gains of 14% over the same period, enough to turn $1,000 into around $7,262.) While looking back is very nice, investors should be more interested in looking forward: Is Netflix a buy now?

Image source: The Motley Fool.

Let's take a look. First, if you just assess a few rough valuation measures, the stock seems somewhat undervalued to fairly valued. For example, its price-to-sales ratio was recently 6.3, just a smidge below its five-year average of 6.5, and its recent forward-looking price-to-earnings (P/E) ratio of 18 is well below its five-year average of 30.

But valuation alone is not sufficient to make an investment decision. How the business is doing is also very important.

The company does have some serious competition, though, including Amazon's Prime Video, Apple's Apple TV, and Alphabet's YouTube. But competition isn't necessarily a deal-breaker. Coca-Cola and PepsiCo have coexisted profitably for decades.

All in all, Netflix isn't terribly compelling at recent levels. Buying a little could serve you well over the long haul, but you can find more attractive opportunities.