It is hard to find flaws in Netflix‘s (NFLX 0.68%) recent business performance. The streaming service giant’s latest quarterly results showed a company firing on all cylinders, with accelerating revenue growth and expanding profit margins.

But the hard part about investing is that a great business and a great stock are not the same thing — especially once the market has already priced in years of strong growth.

While Netflix’s underlying business momentum is undeniably impressive today, the stock’s premium valuation leaves very little room for error. If competition intensifies and top-line growth slows, the multiple investors are willing to pay for the company’s earnings could contract. On the other hand, Netflix’s operating margin is…