Should Investors Revisit Roku Amid Streaming Sector Rally and Double Digit 2025 Gains?

Thinking about what to do with Roku’s stock right now? You’re not alone; plenty of folks are eyeing this streaming platform heavyweight and trying to decide if it’s time to jump in or hold off. Roku has delivered quite a rollercoaster for investors lately. Just in the last month, the stock climbed 6.9%, and it's up a solid 36.7% for the year so far. But that comes after some serious swings: over the past five years, Roku is still down 57.3%, while gains over three years stand at a whopping 97%. Those numbers set the stage for one big question: is the market finally seeing the company’s true value, or are we looking at another false dawn?

Much of the recent action around Roku shares has come as the broader streaming sector faces both fresh headwinds and new opportunities. With competition heating up and streaming subscriptions becoming a staple in more households, perception of Roku’s long-term potential is shifting. Investors are recalibrating their risk tolerance around growth tech names, and Roku’s price movement reflects this tug of war between optimism and caution.

Where does that leave us on valuation? By our count, Roku checks the box for being undervalued in 3 out of 6 major valuation measures, giving it a value score of 3. But what do these numbers actually mean, and how much should they drive your next portfolio move? Let's break down exactly how this score is calculated, and at the end, we’ll consider one approach that beats the rest for understanding where Roku really stands.

Why Roku is lagging behind its peers

Approach 1: Roku Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a widely used valuation tool that estimates a company’s worth by projecting its future cash flows and discounting them back to today's value. Essentially, it asks: how much are all of Roku’s future cash flows really worth right now if you account for the time value of money?

For Roku, the latest trailing twelve months’ Free Cash Flow stands at $318.9 Million. According to analysts and projections from Simply Wall St, Roku’s Free Cash Flow is expected to increase significantly over time, reaching about $1.26 Billion in 2029. These estimates suggest Roku could continue growing, with incremental gains modeled and discounted each year over the next decade.

By crunching the numbers with these projections, the DCF model arrives at an intrinsic value of $163.73 per share. That is roughly a 37.8% discount to where the stock is currently trading, which means Roku is considered significantly undervalued by this method. For investors who trust in growing streaming sector cash flows, this result signals potential upside.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Roku is undervalued by 37.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Roku Price vs Sales

For a company like Roku, which is not yet consistently profitable, the Price-to-Sales (P/S) ratio is often the preferred valuation metric. This is because it allows investors to assess whether the company’s sales, and the market’s expectations for those sales, justify its current price, even when earnings are negative or volatile. For growing technology and streaming businesses, revenue growth is often more stable than earnings, making P/S a useful benchmark.

Growth expectations and the perceived risk of a business directly influence what investors consider a “fair” P/S ratio. Higher future growth and lower risks should justify a higher multiple, while slower growth or higher uncertainty would pull that number down. At present, Roku trades at a P/S ratio of 3.41x. By comparison, its Entertainment industry average is 1.82x, and the peer group sits at around 4.03x. On the surface, Roku’s valuation looks richer than the sector but modest against top peers.

Simply Wall St introduces the concept of a Fair Ratio, which is 2.65x for Roku. This proprietary measure goes beyond simple peer or sector averages by factoring in the company’s projected growth, profit margins, market cap, risks, and unique industry characteristics. Rather than a one-size-fits-all comparison, this approach aims for a more precise gauge of value based on forward-looking fundamentals and company specifics.

In Roku’s case, with a current P/S of 3.41x compared to a Fair Ratio of 2.65x, the stock appears to be trading at a premium to where it “should” be, considering all known factors. This suggests Roku may be slightly overvalued based on this metric alone.

Result: OVERVALUED

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 Roku Narrative

Earlier we mentioned there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a clear, simple way to connect your view of Roku’s future, such as your expectations for its revenue, earnings, and risks, with your own estimate of fair value, grounding your investment decisions in both story and numbers.

Instead of relying only on averages or outside forecasts, Narratives let you define what you believe about Roku. Will expanding global streaming, rising digital ad revenue, and new services drive lasting growth, or will tough competition and ad market risks hold it back? With Narratives, available on the Simply Wall St platform’s Community page, you can easily build your perspective or review others’ perspectives, as millions of investors do every day.

Each Narrative automatically updates its fair value and outlook when key news or results are released, giving you a living benchmark to compare with today’s share price. This makes it clear whether you think Roku is a buy, hold, or sell right now. For example, some investors’ Narratives see Roku’s fair value as high as $130, reflecting optimism about global streaming adoption and advertising wins, while others are as cautious as $70 due to risks from competition and spending cuts. By exploring these perspectives, you can quickly decide which story and price align best with how you see Roku’s future.

Do you think there's more to the story for Roku? 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