Has The Skydance Merger Created a Compelling Opportunity in Paramount Skydance Stock?

• If you are wondering whether Paramount Skydance is genuinely a bargain or just another media stock story everyone talks about and few understand, you are in the right place to see what the numbers actually say about its value.
• The share price has slipped 7.5% over the last week and is down 1.8% over the past month, yet it is still up 40.1% year to date and 37.0% over the last year. This mix hints at shifting market expectations rather than a simple up or down story.
• Much of the recent price action has been shaped by headlines around the completed Skydance merger, which reshaped the legacy Paramount structure and governance. Investors have also been digesting commentary about how the combined studio and streaming strategy might unlock value from Paramount's content library while trying to manage debt and streaming competition.
• On our framework, Paramount Skydance earns a 5/6 valuation score, suggesting it screens as undervalued on most of the usual checks. However, the real story will come from how we combine different valuation approaches and apply a more nuanced way of thinking about value, which we will explore at the end of the article.

Paramount Skydance delivered 37.0% 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

A DCF model estimates what a business is worth today by projecting the cash it can generate in the future and then discounting those cash flows back to their value in today's dollars.

For Paramount Skydance, the latest twelve month Free Cash Flow is about $305 Million. Analysts and internal estimates project that this will grow meaningfully over time, with Free Cash Flow expected to reach roughly $1.47 Billion by 2035 based on a 2 Stage Free Cash Flow to Equity framework that blends analyst forecasts for the next few years with longer term extrapolations by Simply Wall St.

When these projected cash flows, including a terminal value beyond the explicit forecast horizon, are discounted back, the resulting intrinsic value for the shares is $19.25. Compared with the current market price, this implies the stock is trading at a 23.0% discount. This suggests investors are paying noticeably less than what the cash flow profile would justify.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Paramount Skydance is undervalued by 23.0%. Track this in your watchlist or portfolio, or discover 909 more undervalued stocks based on cash flows.

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

Approach 2: Paramount Skydance Price vs Sales

For media and streaming businesses that are still normalising profitability, the Price to Sales ratio is often a more reliable yardstick than earnings based measures, because revenue tends to be more stable than short term profits affected by restructuring, content write downs or integration costs.

What investors are really doing with any valuation multiple is weighing expected growth against risk, so a higher growth, lower risk business should normally justify a higher Price to Sales ratio than a slower, more cyclical one. Paramount Skydance currently trades on a Price to Sales ratio of about 0.57x, well below both the Media industry average of around 1.08x and its peer group average of roughly 1.08x. On the surface this makes the stock look inexpensive.

Simply Wall St's Fair Ratio framework goes a step further by estimating what Price to Sales multiple a company should trade on, given its growth outlook, profitability profile, industry, market cap and risk factors. This produces a Fair Ratio of 1.50x for Paramount Skydance, which is meaningfully above the current 0.57x. On this lens, the shares screen as attractively priced relative to what a balanced view of fundamentals would imply.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 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 us introduce you to Narratives, a simple way to connect your view of a company’s story with the numbers behind its value. A Narrative is your own structured storyline for a stock, where you set assumptions for future revenue, earnings and margins, and those assumptions flow into a forecast and then into an explicit fair value estimate. Narratives on Simply Wall St, available to millions of investors on the Community page, make this process accessible by guiding you from business thesis to financial model without needing a spreadsheet. Once you have a Narrative, you can easily compare its Fair Value to the current share price to decide whether Paramount Skydance looks like a buy, hold or sell under your assumptions. Narratives also stay alive, automatically updating when new information such as earnings results, guidance or major news is released, so your view does not go stale. For Paramount Skydance, one investor’s Narrative might assume a very optimistic fair value with rapid streaming growth, while another’s might build a more cautious fair value driven by slower revenue growth and margin pressure.

Do you think there's more to the story for Paramount Skydance? Head over to our Community to see what others are saying!

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.

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