Roku (NASDAQ:ROKU) stock has experienced a strong rally, increasing by approximately 28% in the last month. This increase follows several analyst upgrades on the stock and better-than-expected Q1 2025 results. For Q1, Roku’s revenue grew by 16% year-over-year to $1.02 billion, while earnings were reported at -$0.19 per share. Roku also reaffirmed its full-year forecast, stating that platform revenue would reach $3.95 billion, in contrast to many other companies that have been retracting their guidance or even opting not to provide it amidst macroeconomic uncertainty and the tariff war. Roku has been excelling precisely where it matters. Streaming hours for the previous quarter totaled 35.8 billion, a 14% increase compared to the previous year, while overall platform revenue rose by 17%. Viewer engagement is on the rise as more users transition from traditional television to streaming.
Nevertheless, despite the recent strong performance and positive narrative, Roku’s fundamentals present a somewhat mixed picture. Our evaluation of Roku based on key parameters such as Growth, Profitability, Financial Stability, and Downturn Resilience indicates that the company has moderate operational performance. However, for those seeking upside with reduced volatility compared to individual stocks, the Trefis High Quality portfolio provides an alternative, having outperformed the S&P 500 and generated returns over 91% since its inception.
How Does Roku’s Valuation Look vs. The S&P 500?
When considering the cost per dollar of sales or profit, ROKU stock appears expensive relative to the broader market.
- Roku has a price-to-sales (P/S) ratio of 2.6 compared to a figure of 3.0 for the S&P 500
- Furthermore, the company’s price-to-free cash flow (P/FCF) ratio is 35.3 versus 20.5 for the S&P 500
How Have Roku’s Revenues Grown Over Recent Years?
Roku’s Revenues have significantly increased over the past few years.
- Roku has experienced an average top-line growth rate of 13.4% over the last 3 years (compared to a 5.5% increase for the S&P 500)
- Its revenues have increased by 17.3% from $3.6 billion to $4.3 billion in the last 12 months (in contrast to 5.5% growth for the S&P 500)
- Additionally, its quarterly revenues rose by 15.8% to $1.0 billion in the latest quarter from $881 million a year prior (versus a 4.8% increase for the S&P 500)
How Profitable Is Roku?
Roku’s profit margins are notably lower than those of most companies in the Trefis coverage universe.
- Roku’s Operating Income over the past four quarters was -$204 million, which reflects a very poor Operating Margin of -4.8% (compared to 13.2% for the S&P 500)
- Roku’s Operating Cash Flow (OCF) during this period was $310 million, indicating a poor OCF Margin of 7.3% (versus 14.9% for the S&P 500)
- For the last four-quarter span, Roku’s Net Income was -$106 million – suggesting a very poor Net Income Margin of -2.5% (compared to 11.6% for the S&P 500)
Does Roku Look Financially Stable?
Roku’s balance sheet appears very strong.
- Roku’s Debt stood at $577 million at the conclusion of the most recent quarter, while its market capitalization is $11 billion (as of 6/6/2025). This indicates a strong Debt-to-Equity Ratio of 5.3% (versus 19.9% for the S&P 500). [Note: A low Debt-to-Equity Ratio is favorable]
- Cash (inclusive of cash equivalents) constitutes $2.3 billion of Roku’s total assets totaling $4.2 billion. This results in a very robust Cash-to-Assets Ratio of 54.0% (compared to 13.8% for the S&P 500)
How Resilient Is ROKU Stock During A Downturn?
ROKU stock has performed far worse than the benchmark S&P 500 index during some recent downturns. While investors are hopeful for a soft landing of the U.S. economy, how severe could conditions become if another recession occurs? Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
- ROKU stock declined 91.9% from a high of $479.50 on 26 July 2021 to $38.80 on 28 December 2022, compared to a peak-to-trough drop of 25.4% for the S&P 500
- The stock has still not recovered to its pre-Crisis high
- The highest the stock has reached since then is $106.87 on 28 November 2023 and it currently trades at about $79
Covid Pandemic (2020)
- ROKU stock fell 57.5% from a high of $479.50 on 26 July 2021 to $203.94 on 15 December 2021, compared to a peak-to-trough decline of 33.9% for the S&P 500
- The stock has yet to rebound to its pre-Crisis high
Putting All The Pieces Together: What It Means For ROKU Stock
Roku’s valuation is attractive on a price-to-sales basis, with the stock trading at only 2.6x revenue compared to a figure of 3.0 for the S&P 500. This is also well below the double-digit multiples the stock traded at in 2021. While profitability remains a weak aspect, this is partly due to Roku’s strategy of focusing on platform expansion over immediate profits from its streaming device sales. Roku’s players act as gateways to its platform business, which currently serves approximately 90 million subscribers (as of the end of 2024). With its extensive data on user behavior, ad performance, and engagement, Roku has significant room for growth. We believe that the momentum from cord-cutting as well as Roku’s solid growth and financial stability should provide upside potential for Roku stock.
Although Roku stock has displayed mixed results over the past few years, dropping over 80% from peaks reached in 2021, you might consider exploring the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to deliver strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provided a proactive means to capitalize on favorable market conditions while minimizing losses when markets decline, as detailed in RV Portfolio performance metrics.