(Note: The author of this fundamental analysis is a financial writer and portfolio manager. He and his clients own shares of NFLX.)

Since August 2016, shares of Netflix Inc. (NFLX) have run away from the broader S&P 500. Shares of the streaming media giant are now up nearly 107%, while the S&P 500 has posted a return of about 18.5%. Shares of Netflix are likely not finished rising either, because the fundamental story continues to improve while the overall trading pattern remains robust. 

Since the end of September, expectations for the fourth quarter continue to build for Netflix with revenue estimates rising by nearly 10% to $3.281 billion. Revenue estimates for next year have surged higher as well, since the end of September estimates have risen to $14.90 billion from $14 billion—a rise of nearly $1 billion. Increasing revenue estimates are supportive of the longer-term growth story of the stock. The significant increase in revenue estimates comes on the heels of the company's third quarter revenue beat and strong subscriber growth numbers. (For more, see: Netflix Has Entered Its Second Phase of Growth.)

NFLX Chart

NFLX data by YCharts

Bullish Estimates

Earnings estimates have been adjusted higher for the stock as well, to $2.30 for 2018 from about $2.05 on October 4. The increasing EPS certainly helps to bring that earnings multiple down some, but still, the company has a 2018 PE ratio at almost 85 times earnings, which at the prior earnings estimates would give the stock a multiple of 95 times earnings. Additionally, adjusting for growth that earnings multiple gets a lot cheaper, implying a PEG ratio of 1.07, due to expectations of 2018 earnings growth of nearly 79%. The earnings growth rate slows in 2019 to only 40%, with earnings expected to rise to $3.84, bringing the PE multiple down to roughly 50, with a PEG ratio of 1.26. 

NFLX EPS Estimates for Next Fiscal Year Chart

Will Need to Continue to Deliver

Netflix's stock price and future rise will depend on the company's ability to continue to not only deliver on expectations but also beat and raise those expectations. It will be necessary until the company's multiple becomes something more palatable, which at this point is not the case. (For related reading, see: Is a Netflix Debt Bubble Coming?)

Bullish Trading 

However, shares of the stock have not shown any signs of slowing down recently. The trading in the stock suggests it could have more gains ahead of it. The stock likely has some down risk to around $190, which should act as technical support. The $190 level is critical for the stock because that level marks the peaks in the stock before breaking out on October 5. The trend in shares of Netflix is still overwhelmingly bullish, and it seems entirely possible the stock is finding a new trading range. 

For now, the fundamentals and the trading patterns still appear supportive of a rising stock price. But how much shares of the stock can continue to rise will hinge on how much the company can deliver on its results and drive subscriber growth. 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.