Roku’s (NASDAQ:ROKU) Volatility should be be Expected given Optimistic Valuation

Shares of Roku, Inc. $Roku Inc(ROKU.US)$ ( NASDAQ:ROKU ) came under pressure on Thursday after the company announced third quarter results. The results were mixed, but the company also said revenue growth would slow sharply in the fourth quarter due to supply chain constraints. Roku is priced for long term growth, and a temporary headwind shouldn’t change the long term outlook. However the stock’s high P/E ratio means investors should expect volatility for some time to come.

As of yesterday, Roku traded on a price-to-earnings (or "P/E") ratio of 182x based on trailing 12-month earnings and the closing price of $313.66. These results bring 12-month trailing EPS up to $2.02, which means the P/E ratio drops to 144x with the price at $292. Nevertheless, it is still eight times the P/E ratio of the average US public company. $Roku Inc(ROKU.US)$