The answer to Question 5

The first thing that immediately stands out from the graph is that the annual percentage revenue growth rate has remained below 10% from 2009 to date. The growth rate peaked in 2010 at 9% and remained relatively stable until 2011 when it dipped to about 8%. From 2011 onwards it has been subpar, to say the least; as a matter of fact, it dropped to zero in 2012 before picking up again in 2013. However, the trend can be best described as erratic as consistent growth has spanned a year or two at most, such as 2009-2010, 2012-2014, and 2015-2017. The rest of the years have been marked by declines or negligible growth, as seen in the years 2010-2011, 2011-2012, and 2014-2015. 2012 appears to have been the worst year not just regarding revenue growth but also concerning profit margins; during this period the company experienced massive revenue losses that could be attributed to some factors, including the global economic downturn.

It is interesting to note that the graph depicting the annual percentage revenue growth rate has a similar pattern to that of profit margin percentage. For example, both values dropped sharply between 2011 and 2012, increased between 2012 and 2014, experienced a noteworthy decline between 2014 and 2015, and then went up again from 2015 to 2017. However, this is not surprising, as revenues determine profits; specifically, benefits are derived from revenues so in most cases the two performance indicators are directly proportional provided expenses are moderated. For the next two years, Netflix estimates that its growth rate will equal 49.84%; this is better than the S&P 500’s figure for the same period, which is 0.12%. The industry and sector estimates are not available.

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