After 28% Rally, Is Roku Stock A Buy?

Roku (NASDAQ:ROKU) stock has seen a solid rally, gaining about 28% over the past month. The gains come after some analyst upgrades on the stock and stronger-than-expected Q1 2025 results. For Q1, Roku’s revenue rose by 16% year-over-year to $1.02 billion, while earnings stood at -$0.19 per share. Roku also reaffirmed its outlook for the full year, noting that platform revenue would come in at $3.95 billion, unlike many other companies, which have been walking back on their guidance or even declining to provide it due to macro uncertainty and the tariff war. Roku has been performing well where it counts. Streaming Hours for the last quarter stood at 35.8 billion, up 14% compared to last year, while overall platform revenue was up 17%. Viewer engagement is increasing as more users shift from traditional television to streaming.

However, despite the strong recent performance and bullish narrative, Roku’s fundamentals tell a slightly more mixed story.  Our analysis of Roku along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a moderate operating performance. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative, having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How Does Roku’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, ROKU stock looks expensive compared to the broader market.

• Roku has a price-to-sales (P/S) ratio of 2.6 vs. a figure of 3.0 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 35.3 compared to 20.5 for S&P 500

How Have Roku’s Revenues Grown Over Recent Years?

Roku’s Revenues have grown considerably over recent years.

• Roku has seen its top line grow at an average rate of 13.4% over the last 3 years (vs. increase of 5.5% for S&P 500)
• Its revenues have grown 17.3% from $3.6 Bil to $4.3 Bil in the last 12 months (vs. growth of 5.5% for S&P 500)
• Also, its quarterly revenues grew 15.8% to $1.0 Bil in the most recent quarter from $881 Mil a year ago (vs. 4.8% improvement for S&P 500)

How Profitable Is Roku?

Roku’s profit margins are considerably worse than most companies in the Trefis coverage universe.

• Roku’s Operating Income over the last four quarters was $-204 Mil, which represents a very poor Operating Margin of -4.8% (vs. 13.2% for S&P 500)
• Roku’s Operating Cash Flow (OCF) over this period was $310 Mil, pointing to a poor OCF Margin of 7.3% (vs. 14.9% for S&P 500)
• For the last four-quarter period, Roku’s Net Income was $-106 Mil – indicating a very poor Net Income Margin of -2.5% (vs. 11.6% for S&P 500)

Does Roku Look Financially Stable?

Roku’s balance sheet looks very strong.

• Roku’s Debt figure was $577 Mil at the end of the most recent quarter, while its market capitalization is $11 Bil (as of 6/6/2025). This implies a strong Debt-to-Equity Ratio of 5.3% (vs. 19.9% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $2.3 Bil of the $4.2 Bil in Total Assets for Roku.  This yields a very strong Cash-to-Assets Ratio of 54.0% (vs. 13.8% for S&P 500)

How Resilient Is ROKU Stock During A Downturn?

ROKU stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• ROKU stock fell 91.9% from a high of $479.50 on 26 July 2021 to $38.80 on 28 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is 106.87 on 28 November 2023 and currently trades at around $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, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock is yet to recover to its pre-Crisis high

Putting All The Pieces Together: What It Means For ROKU Stock

Roku’s valuation is compelling on a price to sales basis, with the stock trading at just 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 point, this is partly down to Roku’s strategy of prioritizing platform expansion over near-term profits from its streaming device sales. Roku’s players serve as gateways to its platform business that now reaches roughly 90 million subscribers (as of the end of 2024). With its extensive data on user behavior, ad performance, and engagement, Roku still has ample room for expansion. We believe the tailwinds from cord-cutting as well as Roku’s strong growth and financial stability should offer upside for Roku stock.

While Roku stock has seen a mixed performance over the last few years, falling over 80% from highs seen in 2021, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.