1 Monster Stock That Turned $10,000 Into $6 Million in 20 Years

Let's face it: Investors put money to work in the stock market with a single core goal -- to achieve strong returns and grow those funds. And over the long term, a diversified portfolio can certainly do just that. Over the past two decades, the S&P 500 index has registered a 557% total return. But that is, of course, the average result from a large group of companies. Some have produced drastically better gains.

For example, a $10,000 investment made exactly 20 years ago in one business that has since become an industry leader would be worth more than $6 million (as of April 22). That monster gain would be life-changing wealth for any patient investor who was bold (and lucky) enough to bet on that then-unproven company and hold on through good times and bad along the way.

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That amazing business was none other than Netflix (NASDAQ: NFLX). But should you buy it today?

Press play

When it comes to disruption and innovation, few companies fall into the same elite category as this one. Netflix's success over the years has been truly exceptional.

When Netflix was young, traditional cable TV was the primary medium by which households watched their favorite shows and movies. However, the growth of high-speed internet access provided the DVD-rental-by-mail company with the technological infrastructure to bring streaming video entertainment to the masses. Netflix launched its streaming service in the U.S. in 2007, and today, it operates in 190 countries.

Netflix easily won over customers by providing a superior experience. People could choose to watch whatever they wanted from a large and growing content catalog whenever they wanted to watch it, all for a monthly fee that was much cheaper than a basic cable subscription. This helped drive rapid adoption. Between the end of 2014 and the end of 2024, the company increased its paid subscriber base by 459% and its revenue by 609%.

A dominant force

It would be hard to overstate just how much of a media powerhouse Netflix has become. More than 300 million households pay for its subscriptions, and management says it reaches a whopping 700 million people. It's on pace to rake in $44 billion in revenue in 2025.

From a financial perspective, Netflix has reached a level of profitability that its early critics probably never thought was possible. Credit goes to the company's massive scale. Keeping the new content pipeline full is expensive, but those costs are (relatively speaking) fixed -- it won't cost the company incrementally more to show the new season of Stranger Things to a larger audience, for example. Netflix plans to lay out $18 billion this year on new shows and films, but it has huge user and revenue bases to amortize that spending against.

The result is a lucrative business model. Netflix executives forecast an operating margin of 29% for 2025. That would be up drastically from 18% in 2020, showcasing the company's ability to scale up profitably. The business reported $6.9 billion in free cash flow last year -- most of which it used to repurchase $6.2 billion worth of outstanding shares.

Press pause

The stock market is in correction territory right now, but this hasn't fazed Netflix investors. The stock is up 17% this year as of April 22, bucking the S&P 500's 10% decline.

But though Netflix stock has been a tremendous winner in the past, I don't believe it's automatically a buy today. The valuation is what worries me. As of this writing, shares trade at a price-to-earnings ratio of 49.2. That's not a small premium to pay.

I'm totally confident that Netflix will not generate another 60,000% return over the next 20 years. Given its current market cap of around $467 billion, it's just not financially feasible for it to grow to a size 100 times bigger than Apple. My perhaps more controversial view is that it might not even outperform the broader market during that time. The business is poised to continue its solid growth, but its current valuation already has some of the market's high expectations baked in.

Investors who believe Netflix is a quality company worth owning should be patient and wait until there's a better opportunity to add shares at a less lofty valuation. But if you prefer not to wait, consider using a dollar-cost averaging strategy to build your position over time.

Should you invest $1,000 in Netflix right now?

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Netflix. The Motley Fool has a disclosure policy.