Assessing Paramount Skydance Shares After 23% Jump on Merger Approval News

If you have been following Paramount Skydance lately, you might be wondering whether now is the right time to jump in, hold on tight, or take some profits off the table. In the past year alone, shares have skyrocketed an impressive 81.9%, with even sharper gains of 77.6% year-to-date. The last month delivered a 37.0% rally, and just this past week, the stock leapt 23.7%. These wild price moves are not random, and they are often shaped by shifting market sentiment, including renewed optimism about the company’s potential collaborations and content pipeline in a rapidly evolving streaming landscape.

Of course, before making any decisions, you probably want to know if Paramount Skydance is actually undervalued at its current level. That is where the numbers get interesting. According to a valuation score that rewards companies for meeting six key value checks, Paramount Skydance scores a solid 5. This means it is recognized as undervalued in five out of six ways analysts typically assess stocks.

So how do these different valuation approaches work, and how reliable are they in today’s fast-changing media environment? Let’s break them down. Then, I will show you why a more holistic view could be the key to unlocking the real value behind the numbers.

Paramount Skydance delivered 81.9% returns over the last year. See how this stacks up to the rest of the Media industry.

Approach 1: Paramount Skydance Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a popular tool for valuing companies. It projects their future cash flows and discounts them back to today’s value, helping investors gauge what a business is truly worth based on its ability to generate cash over time.

Looking at Paramount Skydance, the company’s most recent reported Free Cash Flow is $477.7 Million. Analysts forecast robust growth over the next several years, with 2029’s projected Free Cash Flow reaching around $2.7 Billion. Although analysts provide detailed estimates for the first five years, further predictions out to 2035 are extrapolated using conservative growth assumptions.

Based on these projections, the DCF model estimates Paramount Skydance’s fair value at $48.54 per share. Compared to its current price, this valuation implies the stock is trading at approximately a 61.3% discount to intrinsic value. Such a gap suggests considerable upside because market sentiment may not fully appreciate the company’s future cash generation potential.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Paramount Skydance.

Our Discounted Cash Flow (DCF) analysis suggests Paramount Skydance is undervalued by 61.3%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Paramount Skydance Price vs Sales

The Price-to-Sales (P/S) ratio is an effective valuation tool, especially for companies like Paramount Skydance. When a company is not yet consistently profitable or its earnings are distorted, the P/S ratio offers a clearer look at value by focusing on sales rather than volatile profits. It is particularly useful in the media sector, where companies often experience earnings fluctuations due to heavy investment in content or growth initiatives.

Paramount Skydance’s current P/S ratio stands at 0.72x. To put this in context, the industry average is 1.05x, and the peer group average is 3.22x. This indicates that Paramount Skydance shares are trading at a notable discount to both the typical media company and direct competitors on a revenue basis. However, multiples alone do not tell the full story. Fair valuation depends on more than just industry trends or peer performance. Factors such as growth prospects, risk profiles, profit margins, and even market cap all play significant roles in determining what an appropriate P/S multiple should be.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. Unlike simple peer or industry comparisons, the Fair Ratio takes into account Paramount Skydance’s unique circumstances including its growth outlook, profitability, market size, and risk levels to arrive at a more balanced view. For Paramount Skydance, the calculated Fair Ratio is 1.70x. With its actual P/S multiple at 0.72x, which is well below the Fair Ratio, the stock appears significantly undervalued on this basis.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Paramount Skydance Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple and personalized way to connect your view of a company’s story, the big picture behind its numbers, with your financial forecasts and your idea of what the stock is actually worth. By linking Paramount Skydance’s journey, future revenue, profitability, and even your assumptions about the industry to a fair value, Narratives empower you to act confidently in the market.

Narratives are intuitive and accessible, available right on the Community page at Simply Wall St where millions of investors trade ideas. They help you decide whether to buy, hold, or sell by making it easy to compare your Fair Value with today’s Price, updating quickly as new earnings results or news emerge. For Paramount Skydance, you might spot one investor with a bullish Narrative believing in blockbuster content and rapid recovery, while another expects challenges with streaming competitiveness. This shows just how flexibly Narratives reflect every investor’s perspective.

Do you think there's more to the story for Paramount Skydance? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com