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Investment Analysis ROKU Inc. Antonio Rivera Jr Week 8 Investment Analysis 08/25/2023
Investment Overview Roku Inc. is a company with subsidiaries and is a leader in Television streaming platforms. The company is composed of two main segments platform and devices. They are responsible for the hardware and software the company develops for their TVs and devices. Roku has integrated the TV with Wi-Fi capabilities which allows users to access many of the same apps for streaming that they can access on their cellphones. With these apps, users can access TV shows and movies, the news, and music videos. Using their platform Roku can provide digital advertising. Roku has partnered with many TV developers to help integrate their technology into as many brands as possible. Diversification Roku has a solid history with its numbers and has currently tapered off to consistently holding on to its current trend. I believe as a relatively new company that they have a lot of room to grow in the future. It is currently holding strong with the ability to go up again. The current numbers are post-COVID numbers and are going back up since the pandemic. It will be a good balance for those who might not perform as well as I might hope. Review of Company Roku is a newer company since I have only been out since 2018. It still hasn’t had a long history as some other television makers. The best part of Roku's business model is the fact that they don’t make TVs but instead make devices that make TVs better. The devices can either come separately from the device or as a built-in function for most TVs. The company has
partnered with many well-known TV manufacturers in order to integrate their technology into as many homes as possible. Current Ratios - Profit margin - 2021- 8.77 means that the company had a positive cash flow that year and could make a profit. - 2022- -15.61 The company isn’t currently making money and has more debt than it currently makes in profit. - 2023- is at -20.54%. Current operating expenses are too high, which isn’t a sustainable business model. The company must commit to making a profit to ensure the business can operate. - Current Ratio - 2021- 4.19, the company can pay its short-term obligations. - 2022- unable to get accurate data because it is listed N/A on the balance sheets. - 2023- is 2.83, meaning that the company can pay its short-term obligations - Return on Equity - 2021- 8.76 is a decent number, which means that the company is using the investor's equity to help reinvest into the company. - 2022- Data is listed as N/A for this period. - 2023- is currently at -24.79, meaning the company isn’t doing a good job using their investor's equity to build the company. - Return on Assets
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- 2021- 5.94% is a good percentage, meaning the company is making money off its current assets. - 2022- -11.29% is a bad sign as a negative number means the company is holding too many assets, and some of the assets aren’t making any money. - 2023- is currently -9.83%. A negative return on assets means that with current assets, the business loses money on its assets instead of using them to generate income. - Debt to Equity Ratio - 2021- 48% is a very high debt compared to the stockholder's equity. - 2022- Debt to Equity ratio isn’t possible for this year as some of the information is N/A - 2023- is 25.61%, which means it has a high debt to equity compared to its shareholders. Roku is trending negatively but is one of its worst-performing years since 2019. The company must turn its debt around to continue operating at this level. Roku must also learn to manage its assets more effectively.
Market Beta - In 2019, Roku had a beta value of 2.0, which means a high market volatility. - In 2020, Roku had a 1.64 beta, which was still high volatility. - In 2021, Roku finally dropped below one as it had a .59, indicating a low market volatility. - In 2022, Roku had a .879 beta and was for a second year, seeing low market volatility. - Roku in 2023 has a beta value of 1.76, indicating higher market volatility. It doesn’t follow the trends the market follows or other investments. Ideal Investors - A hedge fund or Mutual fund would be an ideal investor because they have larger amounts of capital to invest within the company. These two types of companies also can
hold the stock for longer periods of time for the stock to improve and do better on the market. - This stock will take a lot of risk so if a private investor would take it on, they would need lots of capital and the ability to watch the market. This stock has had past success and could return to that point. The company must identify key areas to spend working capital and pay its debts. Source List
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1. No author. August 25, 2023. Yahoo Finance Stats. https://finance.yahoo.com/quote/ROKU/key-statistics?p=ROKU . 2. No author. August 25, 2023. Yahoo Finance Financial statements. https://finance.yahoo.com/quote/ROKU/key-statistics?p=ROKU . 3. No author. August 25, 2023. Yahoo Finance Roku Summary. https://finance.yahoo.com/quote/ROKU . 4. Will Kenton. June 30, 2022. Beta. https://www.investopedia.com/terms/b/beta.asp . 5. No author. August 25, 2023. Candlesticks Roku. https://www.profitspi.com/stock/view.aspx?v=stock- chart&uv=270742&p=ROKU#&&vs=638287610315176663 . 6. Casey Murphy. March 4, 2021. The Utility of Trendlines. https://www.investopedia.com/articles/trading/06/trendlines.asp#:~:text=Tren dlines%20are%20easily%20recognizable%20lines,an%20investment's%20value %20might%20move. . 7. Jason Fernando. March 25, 2023. Current Ratio Explained With Formula and Examples. https://www.investopedia.com/terms/c/currentratio.asp .