Is Netflix, Inc. overvalued or undervalued?

As of 4 February 2025, Netflix, Inc. has moved from an expensive to a very expensive valuation grade. The company is currently considered overvalued based on its high valuation metrics. The P/E ratio stands at 58, significantly higher than the industry average, while the EV to EBITDA ratio is 20.62, indicating a premium valuation compared to peers. Additionally, the PEG ratio of 1.28 suggests that the stock price is not justified by its earnings growth.
In comparison to its peers, Automatic Data Processing, Inc. has a P/E ratio of 47.94, and Paychex, Inc. shows a P/E of 31.34, both indicating more attractive valuations. Furthermore, Verisk Analytics, Inc. is also classified as very expensive with a P/E of 166.94, but its extreme valuation further emphasizes Netflix's overvaluation in the market. Despite its strong recent performance, with a year-to-date return of 40.64% compared to the S&P 500's 2.44%, the current valuation metrics suggest that Netflix is not a sound investment at this price level.