Meet the Monster Stock that Continues to Crush the Market

Investors can do well by buying and holding index funds. But incredible gains can be had by finding and investing in individual successful companies early on.

There's one business that dominates its industry whose shares have outperformed the S&P 500 in the trailing one-, three-, five-, 10-, and 20-year periods. That's an unbelievable track record that has resulted in major capital compounding.

Even in 2025, the momentum has continued, with shares up 35% (as of Oct. 17). It's time to meet the monster stock that continues to crush the market.

Image source: Netflix.

This business disrupted the industry to become a global leader

Netflix's (NASDAQ: NFLX) founders were convinced that the internet would fundamentally change how people consumed video entertainment. And boy, were they right. Netflix grew rapidly, adding subscribers and increasing revenue at a brisk pace. Its main competition in the early days was traditional cable TV.

Netflix's streaming service was cheaper and provided a better user experience that was more convenient. It offered a vast selection of content to choose from. Consumers had control over their time, which was extremely valuable and allowed them to watch what they wanted, at any time of the day that they pleased.

These days, Netflix has become a dominant force in global media and entertainment. It ended 2024 with almost 302 million subscribers. It has a presence in 190 countries across the globe. The company has built up expertise in content creation. In mid-September, seven of the top 10 streaming shows were Netflix originals. And it won 30 Emmy Awards in 2025 and has won 26 Oscar awards over the years.

This phenomenal success has changed the industry. Rivals have launched their own streaming services to keep up.

It's easy these days to generate robust profits

It's not surprising that content creation and licensing is extremely expensive. Netflix has had to spend insane amounts of capital in order to develop its library. The critics believed that the business would never generate positive free cash flow (FCF). But Netflix has reached such a massive scale that it can now more than cover its fixed costs.

Generating robust profits is par for the course these days. Netflix raked in $6.9 billion of FCF in 2023 and 2024. Wall Street believes that by 2027, the business will collect $14.4 billion in FCF. It's crazy to think that in 2019, Netflix posted billions in FCF losses. The company is undoubtedly in a strong financial position right now.

Netflix stands out because its competitors have struggled to achieve profitability. At the end of the day, it's all about scale. And Netflix's first-mover advantage in the industry allowed it to grow quickly by signing up new members and boosting revenue when no one else took streaming seriously. This strategy has clearly paid off.

Should you buy the stock right now?

A common way of thinking is that winning stocks will continue their impressive trajectories in the future. After all, owning high-quality companies can lead to satisfactory investment returns over the long haul. This perspective will encourage investors to add Netflix to their portfolios today.

But is the stock really a smart buy right now? Netflix might continue its winning ways. However, the valuation leaves zero margin of safety for prospective investors. It's not easy buying shares when they trade at a price-to-earnings multiple of 51.1. The market is fully aware of how great of a business this is. As a result, expectations are elevated for Netflix to continue operating at a very high level.

In my view, there's a good chance that the valuation contracts over the next five to 10 years. And this could lead to disappointing returns for shareholders.

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