Roku, Inc. (ROKU): what the price requires
At today's price, Roku, Inc. (ROKU) is priced for today's economics sustained for ~14.8 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/ROKU
Headline
| Field | Value |
|---|---|
| Ticker | ROKU |
| Company | Roku, Inc. |
| Current price | $142.18/sh |
| Composition | Platform 87% / Devices 13% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | revenue-multiple |
| EV / sales paid | 4.4x |
| Steady-state operating margin assumed | 17.5% |
| Must persist for | 14.8y |
The company earns no operating profit yet; the inversion runs on the revenue multiple and an assumed steady-state margin.
Solve inputs: computed at a 14.3% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.5 years.
Reconcile: at the x-ray's 9.3% required return this reads ~24%/yr; the models below use their own rates.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | -0.44σ |
| sustained it ~10 years at this level | 14% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 10.41x | 4 | expensive |
| Earnings | 5.51x | 4 | expensive |
| Relative | 5.05x | 5 | expensive |
| Growth | 0.97x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.
Per-Model Detail (n=16)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $121.55 | 1.17x | yes | FCF base $0.6B, growth 17% (input: historical growth), terminal g 4.0%, WACC 8.8%, 6yr projection |
| DCF Exit Multiple | Growth | $168.32 | 0.84x | yes | Exit EV/EBITDA: 116.8x / 118.8x / 120.8x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $28.18 | 5.05x | yes | P/E 22x (blended: static sector reference 10x + trailing (TTM) 107x), scenarios: 18.0x / 22.0x / 26.0x (bear / base = reference held flat / bull), EV/EBITDA 15.4x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $14.42 | 9.86x | yes | BV/sh $17.69, ROE (TTM) 7.5%, ke 9.3% |
| Two-Stage Excess Return | Asset | $12.98 | 10.95x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $147.00 | 0.97x | yes | Rev $5.0B, growth 17% (input: historical growth; tapered), Terminal P/S: 3.5x / 4.3x / 5.1x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $16.20 | 8.78x | yes | EPS $1.35, growth 2% (input: historical EPS growth), PEG=53.28 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $12.76 | 11.14x | yes | BV $17.69 + 5yr PV of (ROE (TTM) 7.5% − Kₑ 9.3%) × BV; BV grows 4.9%/yr |
| Graham Number | Asset | $23.18 | 6.13x | yes | √(22.5 × EPS $1.35 × BVPS $17.69) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $12.28 | 11.58x | yes | EBITDA $0.18B × sector EV/EBITDA 7.0x |
| FCF Yield | Earnings | $42.63 | 3.34x | yes | FCF $537.6M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $18.48 | 7.69x | yes | SBC-adj FCF $0.20B (FCF $0.54B − SBC $0.34B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $43.56 | 3.26x | yes | EPS $1.35 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $4.90 | 29.02x | yes | BV $17.69 × (ROIC 2.4% / WACC 8.8%) (excluded from median) |
| P/Sales Sector | Relative | $39.45 | 3.60x | yes | Revenue $4.97B × sector P/S 1.2x |
| PEG Fair Value | Relative | $50.62 | 2.81x | yes | EPS $1.35 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $14.59 | 9.75x | yes | EPS $1.35 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $2.4b |
| Interest coverage | -10.1x |
| Share count CAGR (dilution) | 2.7% |
| Burning cash | no |
Operating profit is negative or near zero and the company has no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so years-to-repay cannot be computed honestly.
Bullet Takeaways
- Roku is the operating system roughly nine in ten of its dollars run through, with Platform revenue 87% of the mix and the device hardware mostly a customer-acquisition cost rather than a profit center.
- At about four times revenue the price assumes Roku eventually earns a 17.5% operating margin and grows at its self-funding ceiling for some fourteen years, while it earns roughly 2% operating margin today.
- The watch item is the advertising and subscription engine: Q1 2026 Platform revenue grew 28% to $1.13B and management raised full-year platform guidance to about $5.0B.
Bull Case
Roku's moat is distribution, and distribution in streaming is the operating system the television boots into. Once a Roku is the home screen, every app maker, advertiser, and content owner negotiates through Roku to reach that viewer. The company describes the engine plainly, generating "Platform revenue from the sale of digital advertising" and subscriptions, and Platform is now 87% of the business. The device hardware, the other 13%, is sold near cost to put more televisions into that funnel. That is the unusual mechanic: Roku gives the box away in spirit and monetizes the screen for years.
The scale has reached the point where the platform throws off real cash. Trailing free cash flow was $483.6 million per the latest filing, and Q1 2026 turned a $86 million net income with adjusted EBITDA up 165% year over year. The advertising side is compounding on third-party demand: programmatic spend through outside demand-side platforms grew more than 40% year over year, which matters because it widens the pool of advertisers bidding for Roku inventory beyond Roku's own sales force. More bidders per impression is the lever that lifts platform margin over time.
The two revenue streams now disclosed separately each grew faster than the whole. Advertising reached $613 million, up 27%, and subscriptions $519 million, up 30%, in Q1 2026. Subscriptions matter to the bull case because they are recurring and less cyclical than ad budgets, and they ride the same install base at near-zero incremental cost. Management raised full-year platform revenue guidance to roughly $5.0 billion, about 21% growth. The bet is that the install base keeps widening while the revenue per screen keeps climbing, and both lines are still moving the right way.
Bear Case
The fragility in Roku is not the balance sheet in the usual sense; it holds about $2.38 billion of cash and no debt. The fragility is what the income statement does to that cash. Stock-based compensation is large enough that free cash flow and economic profit are different numbers: trailing free cash flow was about $537.6 million, but net of the roughly $337 million of stock compensation the underlying figure is closer to $200 million. The share count has grown about 2.7% a year, so the cash the platform earns is partly being handed to employees as equity, and existing holders are diluted to pay for it. A business that pays its people in stock is borrowing from shareholders without it showing up as debt.
That would be tolerable if the price asked little. It asks a great deal. At about four times revenue the price implies Roku eventually earns a 17.5% operating margin while growing at its self-funding ceiling for roughly fourteen years; it earns about 2% operating margin today. The distance between 2% and 17.5% is the entire bet. The methods that read assets, earnings power, and peer multiples all land far below the price, several at five to ten times below it. Only the forward-growth methods reach the price, and they get there by holding today's elevated revenue multiple flat across the forecast. There is no value-method floor anywhere near $138 (as of June 27, 2026).
Roku also operates in a market where the largest competitors give away the same operating system to sell other things. The company warns that its "quarterly operating results may be volatile and are difficult to predict", which is the honest description of a business whose advertising revenue rises and falls with ad budgets and tentpole events like the Olympics and Super Bowl. When those budgets tighten, the platform's growth rate compresses precisely when the price needs it to persist for over a decade. The cash cushion buys time; it does not narrow the gap between what the price assumes and what the margin has shown.
Valuation
The price is read against sales because trailing operating profit sits below the steady state the price assumes. At about four times revenue, the market is paying for Roku to grow at close to its self-funding ceiling for roughly fourteen years and to settle at a 17.5% operating margin. The company earns about a 2% operating margin today. The near-term growth rate is within what Roku has recently delivered; the stretch is in how long it must persist, and only about one in seven fast-growers has sustained that pace even a decade.
The valuation methods sort into a stark pattern. The asset-value lens lands roughly ten times below the price, earnings power about five times below, and peer multiples nearly five times below; the relative read blends a sector multiple near 10 times against a trailing multiple above 100 times, which is what an unprofitable-on-GAAP, fast-growing name looks like through a peer lens. Only the forward-growth methods reach the price, by crediting the durable compounding the static frames structurally cannot price. So the price is not defended by any value method; it is defended only by a long growth runway holding.
Solvency is a genuine strength and a genuine asymmetry. About $2.38 billion of cash against no debt and interest coverage that is effectively unbounded means Roku cannot be forced into a corner by the balance sheet. The offset is on the share count, which has grown about 2.7% a year as stock compensation funds the workforce, so the per-share claim erodes even as cash builds. The downside is bounded by cash; the upside is bounded by whether advertising and subscription growth can carry the margin from 2% toward the high teens before the growth runway runs out.
Catalysts
Q1 2026 was a step-change quarter. Total revenue was $1.25 billion, up 22% year over year, Platform revenue was $1.13 billion, up 28%, and the company turned a net income of $86 million with adjusted EBITDA up 165%. For the first time Roku broke out advertising and subscriptions separately: advertising of $613 million grew 27% and subscriptions of $519 million grew 30%, helped by major sporting events. The separate disclosure is itself a catalyst, because it lets the market value the recurring subscription stream apart from the cyclical ad stream.
The advertising engine is broadening. Third-party programmatic spend through outside demand-side platforms grew more than 40% year over year, a sign that demand is coming from beyond Roku's own sales team. On the strength of the quarter, management raised full-year platform revenue guidance to nearly 21% growth, roughly $5.0 billion, and guided Q2 to about 20% platform growth and $1.3 billion in total revenue.
What to watch is whether the advertising momentum holds outside of tentpole-event quarters, and whether the margin keeps climbing as scale builds. The guidance raise says management is underwriting the growth into the back half; the next print tests whether the advertising acceleration was the events or the platform.
Peer Cohorts (Per Segment, With Filing Citations)
Platform (reported)
- TTD (TRADE DESK, INC.)
- (no filing in the citation store)
- MGNI (MAGNITE, INC.)
- (no filing in the citation store)
- DV (DoubleVerify Holdings, Inc.)
- (no filing in the citation store)
- APP (AppLovin Corp)
- (no filing in the citation store)
- PSKY (Paramount Skydance Corporation)
- (no filing in the citation store)
Devices (reported)
- APP (AppLovin Corp)
- (no filing in the citation store)
- TTD (TRADE DESK, INC.)
- (no filing in the citation store)
- MGNI (MAGNITE, INC.)
- (no filing in the citation store)
- ADEA (Adeia Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Roku Q1 2026 earnings release, May 2026