Question

Netflix Inc [NFLX] has a P/E ratio of 250.64, a Forward P/E ratio of 73.37, a...

Netflix Inc [NFLX] has a P/E ratio of 250.64, a Forward P/E ratio of 73.37, a Beta of 1.35, and a PEG ratio of 1.51 (according to Yahoo! Finance). How much are analysts expecting NFLX’s EPS to grow per year over the next five years according to this data?

A 33%

B 66%

C 133%

D 166%

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Answer #1

PEG ratio is calculated by dividing P/E ratio with the expected growth rate in earnings. Yahoo finance calculates PEG by using current year P/E and a five year expected growth rate in earnings. So,

or Expected growth rate = 166%

*Please note that in the formula, percentages are not converted into decimals while making computations. For example 166% is inputted as 166 itself and not 1.66.

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