• If you are wondering whether Roku stock is still attractively priced after its recent run, this article walks through the key numbers so you can judge the value for yourself.
• Roku shares last closed at US$135.93. The stock is up 6.5% over the past month, 25.0% year to date and 57.1% over the last year. It is still sitting below its level from five years ago, when the return over that period is a decline of 68.8%.
• Over the past three years, Roku has delivered a 115.8% return, which has kept it in focus for investors assessing how current expectations line up with the stock price. Recent headlines around the business model and competitive position in streaming have added more attention to whether that return profile still makes sense at today's valuation.
• On Simply Wall St's framework, Roku currently scores a 2 out of 6 valuation score. The rest of this article will compare what different valuation methods say about the stock and then finish with a broader way to think about value that goes beyond the usual ratios.

Roku scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Roku Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what Roku might be worth by projecting its future cash flows and then discounting those back to today using an appropriate rate. The goal is to translate a stream of future dollars into a single present value per share.

Roku is currently generating last twelve months Free Cash Flow of about $527.9 million. On Simply Wall St's 2 Stage Free Cash Flow to Equity model, analyst estimates are used for the next five years, then cash flows are extrapolated beyond that. For example, projected Free Cash Flow in 2030 is $1,780.1 million, with interim projections for 2026 to 2035 ranging from $805.4 million to $2,530.7 million, all in $ and discounted back to today.

When those projected and extrapolated cash flows are added up and discounted, the model suggests an intrinsic value of about $223.04 per Roku share. Compared with the recent share price of $135.93, this implies the stock is 39.1% below the DCF estimate, which points to Roku trading at a discount on this model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Roku is undervalued by 39.1%. Track this in your watchlist or portfolio, or discover 44 more high quality undervalued stocks.

Approach 2: Roku Price vs Earnings

For a profitable company like Roku, the P/E ratio is a common way to think about value because it links what you pay for the stock to the earnings the business is generating today. Investors usually expect higher growth or lower risk to justify a higher P/E, while slower growth or higher risk tends to support a lower, more conservative multiple.

Roku currently trades on a P/E of 99.64x, which is well above the Entertainment industry average of 22.72x and also above a peer group average of 52.59x. Those comparisons show how the market is currently pricing Roku relative to both its sector and closer peers in the streaming space.

Simply Wall St's Fair Ratio for Roku is 34.53x. This is a proprietary estimate of what a more appropriate P/E might be after considering factors such as Roku's earnings growth profile, profit margins, industry, market capitalization and specific risks. Because it adjusts for these company level characteristics, the Fair Ratio aims to be more tailored than a simple comparison with broad industry or peer averages.

Comparing Roku's current P/E of 99.64x with the Fair Ratio of 34.53x suggests the stock is trading above this tailored benchmark.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Roku Narrative

Earlier the article mentioned that there is an even better way to think about Roku than a single P/E or DCF number. Narratives are introduced here as simple stories that tie your view of Roku's business to specific forecasts for revenue, earnings and margins. These then flow through to an estimated fair value that you can compare with the current share price.

On Simply Wall St's Community page, Narratives allow you to pick or build a scenario. For example, you might choose a more optimistic Roku case that assumes revenue growth of 16.2% a year, profit margins at 13.3% and a fair value of US$170.0. Alternatively, you could select a more cautious Roku case that works with 12.6% annual revenue growth, 8.1% profit margins and a fair value of US$94.08. Because these Narratives are updated as new news or earnings are added, you can quickly see how different stories and assumptions translate into changing fair values, then decide for yourself whether the current Roku price of US$135.93 looks high or low against the Narrative you find most reasonable.

For Roku, here are previews of two leading Roku Narratives to make comparison easier:

Fair value in this bullish narrative: US$151.68

Gap to that fair value versus the last close of US$135.93: about 10.4% below the narrative fair value

Revenue growth assumption: 13.39% a year

• Analysts backing this view see continued migration from linear TV to streaming and digital ads supporting Roku's user growth, engagement and higher margin advertising revenue over time.
• They factor in rising profit margins, with net margin assumptions moving from 4.1% to 11.6%, helped by content, self service ad tools and operational efficiency.
• The fair value of US$151.68 reflects expectations for revenue of US$7.2b and earnings of US$836.9m by 2029, with Roku trading on a future P/E of 34.5x using an 8.7% discount rate.

Fair value in this bearish narrative: US$94.08

Gap to that fair value versus the last close of US$135.93: about 44.5% above the narrative fair value

Revenue growth assumption: 12.62% a year

• This view focuses on Roku's reliance on digital ad revenue, exposure to privacy regulation, and a maturing streaming market that could limit active account growth and long run platform revenue.
• It assumes profit margins improve from 1.9% to 8.1%, but sees rising competition from large tech ecosystems and content bundling as potential constraints on user engagement and pricing power.
• The fair value of US$94.08 is based on revenue of US$6.8b and earnings of US$550.4m by 2029, with a future P/E of 33.1x and a higher 9.0% discount rate, implying current market expectations may be ahead of these assumptions.

These two Narratives bracket a wide range of outcomes for Roku, so the key is deciding which set of assumptions and risks feels closer to how you see the business and then checking whether the current share price of US$135.93 fits that story or not.

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