Amazon.com, Inc. (AMZN)vs Netflix, Inc. (NFLX)

Quick verdict

Amazon.com, Inc. (AMZN) and Netflix, Inc. (NFLX) appeal to different investors. On our six-factor framework, AMZN scores 0.5 and NFLX scores 5.5. NFLX looks cheaper on the multiples that matter, while neither clearly grows faster and NFLX earns higher returns on capital. Overall, NFLX edges this comparison, but the right pick depends on whether you prioritise value, growth, income or balance-sheet safety.

2-year relative performance

At-a-glance comparison

Business model and revenue mix

Amazon.com, Inc. operates in Specialty Retail (Consumer Cyclical), while Netflix, Inc. sits in Entertainment (Communication Services). The two operate in different sectors, so cyclicality and end-market exposure differ — factor that into any portfolio overlap. AMZN carries a beta of 1.46 versus 1.52 for NFLX, meaning NFLX has historically been the more volatile of the two.

Valuation

On valuation, NFLX is the cheaper stock. AMZN trades on a forward P/E of 45.95 and EV/EBITDA of 12.07, against 32.49 and 9.93 for NFLX. Price-to-sales is 3.77 vs 6.17, and free-cash-flow yield is 2.0% vs 4.4%. A higher multiple is only justified if the company can sustain faster growth or wider margins, which is exactly what the next sections test.

Growth profile

neither clearly is the faster grower. AMZN has compounded revenue at 12.4% over three years with EPS growth of 28.8%, while NFLX has delivered 15.8% revenue and 27.1% EPS growth. Growth like this is the single biggest driver of long-term returns, but it also tends to come with a richer valuation, so it must be weighed against the multiples above.

Profitability and quality

On profitability and quality, NFLX is stronger. AMZN posts a 12.1% operating margin, 30.5% return on equity and 8.5% return on invested capital. NFLX posts 29.7%, 48.0% and 24.3% respectively. Return on invested capital above roughly 15% is a hallmark of a durable competitive advantage, so this metric deserves particular attention.

Balance-sheet risk

NFLX has the safer balance sheet. AMZN carries net-debt/EBITDA of 0.86x with a current ratio of 1.03, versus -0.82x and 1.14 for NFLX. Lower leverage gives a company more room to invest through a downturn and reduces the risk of dilution or distress.

Price performance and shareholder returns

Over the past year AMZN returned 4.0% against 106.6% for NFLX; on a three-year annualised basis it is 42.8% vs 38.9%. AMZN yields 0.0% and NFLX yields 1.8%. Past performance never guarantees future results, but the multi-year track record shows how the market has rewarded each business so far.

Which stock fits which investor

For value-oriented investors, NFLX is the better fit on today's multiples. Growth investors will likely prefer NFLX, which is expanding faster. Income investors should lean toward NFLX for its higher shareholder yield, while investors who prize quality-at-a-reasonable-price will favour NFLX for its superior returns on capital. This is a comparison of facts, not a recommendation — your time horizon, risk tolerance and existing holdings should drive the final decision.

• Value: NFLX
• Growth: NFLX
• Income: NFLX
• Quality: NFLX

Frequently asked questions

Is AMZN or NFLX the better buy right now?

Neither is universally "better." AMZN scores 0.5 and NFLX scores 5.5 on our six-factor framework. NFLX is cheaper, neither clearly grows faster, and NFLX is higher quality — so the right pick depends on your objective.

Which stock is cheaper, AMZN or NFLX?

NFLX is the cheaper stock across forward P/E (45.95 vs 32.49), EV/EBITDA (12.07 vs 9.93) and price-to-sales (3.77 vs 6.17).

Which has grown faster, AMZN or NFLX?

neither clearly has the stronger growth profile, with three-year revenue CAGR of 12.4% for AMZN versus 15.8% for NFLX.

Which stock pays a bigger dividend?

AMZN yields 0.0% and NFLX yields 1.8%, so NFLX is the stronger income choice.

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