Roku Trades at a P/CF of 42.86X: Should You Still Buy the Stock?

Roku ROKU shares are trading at a premium, as suggested by a Value Score of D. In terms of the price-to-cash flow ratio, ROKU is currently trading at 42.86X, above the Zacks  Broadcast Radio and Television industry average of 34.28X.As of March 31, 2025, Roku generated $310.1 million in operating cash flow over the trailing twelve months, highlighting strong cash generating ability. We believe Roku’s growing scale across U.S. households and its expanding programmatic ad capabilities justify the premium valuation. The company is benefiting from both performance-driven advertising solutions and a differentiated content discovery experience. Do these factors make ROKU stock a compelling buy at current levels? Let’s find out.ROKU’s Price/Cash Flow RatioImage Source: Zacks Investment ResearchROKU’s Initiatives and Partnerships Drive SubscriptionsRoku is ramping up its subscription efforts by enhancing the Roku Experience with personalized features like an AI-powered content row that promotes premium titles, free trials and bundles. A seamless billing system and rising streaming demand have been helping Roku build tens of millions of billed subscriptions each month.In the first quarter of 2025, Roku acquired Frndly TV, adding more than 50 live and on-demand channels, and partnered with Apple TV+ to offer Season 1 of Severance for free, along with a three-month trial. These moves aim to drive engagement and boost conversions, with more initiatives expected this year.ROKU Expands Offering With Roku Select Series TVsRoku has launched its first Roku-made TVs in Canada, available exclusively at Best Buy. The new Roku Select Series includes QLED 4K models from 50" to 75" and smaller 4K and HD variants, all powered by the intuitive Roku OS. With features like Smart Picture, Bluetooth headphone support, a built-in remote finder and access to 200-plus live TV channels, the TVs are built to enhance the streaming experience for Canadian users.This launch marks a strategic step forward for Roku, allowing it to control both the hardware and software experience, which can significantly deepen user engagement. By expanding its Roku-made TV line into Canada, the company strengthens its international presence and creates a more direct channel to grow its advertising business and drive subscriptions.ROKU’s Efforts to Stay Competitive in the Ad MarketRoku competes in a crowded ad-supported streaming market alongside giants like Netflix NFLX, Paramount Global PARA and Disney DIS. As of May, Netflix had 94 million users on its ad-supported tier, up from 70 million in November. Paramount+, the streaming service of Paramount Global, is expanding its basic ad tier to Germany, Switzerland and Austria, while Disney’s ad-supported user base hit 157 million globally in January 2025, including 112 million in the United States.To stay competitive, Roku is doubling down on ad-supported streaming through tech upgrades and strategic alliances. Its new partnership with Amazon Ads via Amazon DSP expands reach across Roku and Fire TV, helping advertisers tap into a large base of authenticated viewers. Early results showed 40% more unique reach with the same budget. Combined with Roku’s AI-powered Home Screen and partnerships with Adobe and INCRMNTAL, these efforts are driving stronger monetization and reinforcing Roku’s momentum in ad-supported streaming.ROKU’s Earnings Estimate Revisions Show Upward TrendThe Zacks Consensus Estimate for 2025 loss is pinned at 18 cents per share, which has narrowed by a penny over the past 30 days, indicating growth of 79.78% from the figure reported in the year-ago quarter.The consensus mark for 2025 total revenues is pegged at $4.55 billion, suggesting year-over-year growth of 10.63%. Roku’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 51.15%.Roku, Inc. Price and Consensus Roku, Inc. price-consensus-chart | Roku, Inc. QuoteROKU’s Share Price MovementROKU shares have risen 22.2% year to date, underperforming the Zacks Broadcast Radio and Television industry’s growth of 30.9% but outperforming the Zacks Consumer Discretionary sector’s return of 10.3%. The company is constantly innovating across its platform and building strategic partnerships that have positively impacted investor sentiment. Roku has a strong liquidity position that allows it to innovate and grow, and meet its working capital requirements. As of March 31, 2025, cash and cash equivalents were $2.26 billion compared with $2.16 billion as of Dec. 31, 2024, and Roku had no long-term debt which further solidifies Roku’s cash balance. If we look at its competitors, Netflix, Paramount Global and Disney shares have gained 40.3%, 24% and 7.6%, respectively, in the same time frame.ROKU’s YTD Price PerformanceImage Source: Zacks Investment ResearchConclusion: Time to Buy ROKU Stock?Given Roku’s expanding subscription base, strategic hardware growth and rising momentum in ad-supported streaming, the company is well-positioned for long-term success. Its partnerships with major players like Amazon and Apple, coupled with tech-driven innovations and a solid balance sheet, reinforce its growth potential. Despite trading at a premium, Roku’s ability to consistently beat earnings estimates justifies the valuation. With strong fundamentals, zero long-term debt and upward revisions in earnings, investors should consider buying ROKU stock as it continues to strengthen its platform and unlock new monetization avenues.ROKU currently sports a Zacks Rank #1 (Strong Buy) and has a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.Zacks' Research Chief Picks Stock Most Likely to "At Least Double"Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.See Our Top Stock to Double (Plus 4 Runners Up) >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Netflix, Inc. (NFLX): Free Stock Analysis Report The Walt Disney Company (DIS): Free Stock Analysis Report Roku, Inc. (ROKU): Free Stock Analysis Report Paramount Global (PARA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks