The price-to-earnings (P/E) ratio is one of the most used valuation metrics in equity analysis. Here, you'll learn how to calculate the trailing twelve-month (TTM) P/E, the forward P/E, and examine how P/E analysis can be applied to the entertainment content behemoth, Netflix, Inc (NFLX).

Trailing Twelve-Month (TTM) P/E

To determine this calculation, one must first understand ꦑthe underlying components, which are as follows:

• The numerator of the P/E ratio is the current stock price, symbolized by the letter “P.”
• The denominator of the P/E ratio is earnings per share (EPS), symbolized by the letter “E.”

The EPS is itself a ratio that breaks earnings down by 💙the company’s shares outstanding (diluted), which can be calculated as f🦄ollows:

(Net Income – Preferred Dividends / End-of-Period Common Outstanding Shares

Together, the price divided by the EPS results in the P/E, which reflects how much investors are willing to pay per $1 of a company’s earnings. The price portion is straightforward. One must simply pull up Netflix’s share price (the numerator) on any given day. Determining the denominator is also easy for investors, because the requires all public companies to report this ratio in their quarterly Form 10-Qs and annual 10-Ks. Also, many 澳洲幸运5开奖号码历史查询:financial analysis websites provide this information for investors.

Remember that EPS reflects the company’s earnings to outstanding shares, which demonstrates how much money the company makes per share. This is a fluid and ever-fluctuating value, due to changes in earnings and outstanding shares. For instance, if shares outstan♌ding increase without a corresponding increase in earnings, EPS will decrꩲease.

Furthermore, EPS is typically calculated using diluted shares, which account for any convertible shares that may be issued through bonds, warrants, empl൩oyee benefits, or other sources.

For a TTM P/E example, consider Netflix’s reported EPS for the four quarters ended Dec. 31, 2024:

• Q1/2024: $5.28
• Q2/2024: $4.88
• Q3/2024: $5.40
• Q4/2024: $4.27

Adding these figures up yields a TTM EPS of $19.83. And by dividing Netflix’s Dec. 31, 2024 closing price of $891.39 by that number, we arrive at $44.95 ($891.39 ÷ $19.83), which was NFLX’s TTM P/E ratio on that day. This tells us that, at that time🥀, investors were willing to pay $44.95 per $1 of NFLX’s earnings.

Forward P/E

While TTM P/E calculations are objectively measured by historical data, forward P/Es are subjective calculations that consider a company's projected earnings-per-share growth. The growth rate can be inferred through management guidance, industry prospects, and growth models based on fundamentals, such as return on invested capital.

For 2025, analysts projected an average EPS of $24.56 for Netflix (Q1-Q4 forecasts of 5.73 + 6.25 + 6.96 + 5.62). However, keep in mind that the forward P/E also uses the stock's current price in the numerator. Consequently, determining the forward P/E required the following calculation: $891.39/$24.56 = $36.29. As is typically the case, the forward P/E was lower due to a higher EPS projection at that time.

Analysis

P/E values can be considered in the context of a company’s competitors. Consider the following TTM and forward P/E ratios for several of Netflix’s rivals (this analysis also considers 澳洲幸运5开奖号码历史查询:price-to-sales (P/S) ratio and uses data from Feb. 28, 2025):

This data shows that Netflix had the highest TTM P/E and forward P/E. Year-over-year growth data from Feb. 28, 2025, shows that revenue grew at 16%, and earnings were expected to grow between 23.38% and 28.34%. Netflix also had the highest P/S ratios.

The Bottom Line

Netflix is quite possibly the m🦩ost used streaming platform, and it consistently outperforms its competitors. Its P/E ratio is well above that of Amazon and Apple, its two biggest competitors, indicating its popularity with investors and consumers.