ROKU Fair Value & DCF
Score
ROKU fair value $116.93. Price $160.52. Price is 37% above fair value.
Worked example
Cash-flow value. Starting free cash flow is $6.90 a share. Year 1 is the first earnings forecast, so it has no growth rate of its own. The forecast then reaches 31.41%, and that pace fades in a straight line to 3% terminal growth by year 10. The discount rate is 12.00% (beta 2.00, capped at 12%). It is beta-adjusted and capped at 12%. The cash-flow value is $156.49 a share.
Earnings value. Next-twelve-months earnings per share of $4.11 times 18.83 is $77.37. The peer group is Communication Services, 23 companies worth at least $10 billion. This stock has no 10-year median P/E, so the peer median of 18.8 is kept between 8 and 30, which is 18.83.
Fair value is the average of the two, $116.93. The price is $160.52, which is 37.3% above fair value.