Netflix (NASDAQ:NFLX) and Roku (NASDAQ:ROKU) are two of the market's top streaming media stocks. Netflix boasts the top streaming video platform in the world in terms of paid subscribers, while Roku is the market leader in streaming media devices in North America.

Netflix was actually an early investor in Roku. Roku's founder, Anthony Wood, previously worked at Netflix, where he led the development of a set-top box for its streaming platform. But Wood subsequently left Netflix and led Roku's development of its own set-top box, and the rest is history.

A group of friends watches TV together.

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Netflix and Roku are both benefiting from the slow death of "linear TV" services like cable and satellite TV and the rise of on-demand streaming services. Netflix launched its first streaming video platform in 2007, and its stock has skyrocketed a whopping 21,430% over the past 14 years. Roku went public in 2017, and its stock has already risen roughly 2,290% from its IPO price of $14.

However, both companies also face a growing number of competitors. Netflix needs to deal with Disney (NYSE:DIS) and other rapidly growing streaming platforms, while Roku faces intense competition from Amazon (NASDAQ:AMZN) and other tech giants in the crowded streaming device market.

Is either of these streaming stocks still worth buying today? Let's compare their core businesses, growth rates, and valuations to find out.

How fast is Netflix growing?

Netflix generates nearly all of its revenue from paid subscriptions. Its total revenue rose 24% to $25 billion in 2020, and paid subscribers grew 22% to 203.7 million. Its net income increased 48% to $2.8 billion.

Netflix generated robust growth throughout the pandemic as people stayed at home and streamed more content. Postponed projects and reduced marketing expenses throughout the crisis also boosted Netflix's operating margin from 12.9% in 2019 to 18.3% in 2020.

In the first half of 2021, Netflix's revenue increased 22% year over year to $14.5 billion. Its number of paid subscribers rose 8% to 209.2 million, which exceeded its own guidance but sparked some concerns about a post-pandemic slowdown and competition from Disney -- which ended its latest quarter with nearly 174 million streaming subscribers on Disney+, ESPN+, and Hulu.

On the bright side, Netflix's operating margin still rose from 19.4% to 26.2%, and its net income surged 114% to $3.1 billion. That expansion can partly be attributed to its tighter spending on new content.

Netflix aims to keep its annual revenue growth at about 20%, but analysts expect its revenue to rise just 19% this year and 15% next year. They expect its earnings to jump 72% this year but improve just 23% next year, presumably as it ramps up its spending on new shows and movies again.

How fast is Roku growing?

Roku generates most of its revenue and gross profits from its software platform -- which hosts its integrated ads, content partnerships, and ad-supported Roku Channel -- while the rest comes from its first-party hardware players. By expanding its higher-margin platform business, Roku can sell its streaming devices at much lower prices.

Roku's revenue rose 58% to $1.8 billion in 2020, and its active accounts increased 39% to 51.2 million. That growth can be attributed to stay-at-home trends during the pandemic, as well as the expansion of the Roku Channel -- which now includes Quibi's former shows -- as a free alternative to linear TV channels and paid streaming platforms like Netflix.

Roku ended the year with an operating loss, but its gross margin rose year over year from 43.9% to 45.4% as it expanded its platform business. Its adjusted EBITDA more than quadrupled to $150 million.

In the first half of 2021, Roku's revenue surged 80% year over year to $1.2 billion. Its active accounts increased 28% to 55.1 million, but a sequential drop in its streaming hours in the second quarter -- which Roku attributed to reopening trends -- spooked investors.

But Roku's gross margin still expanded from 42.5% to 54.5%, even as its hardware business struggled with component shortages, and it generated an adjusted EBITDA of $248 million, compared to a loss of $20 million in the first half of 2020. Analysts expect Roku's revenue to rise 60% this year and 37% next year. There are hopes that it will post its first adjusted profit this year, and for its earnings to rise 32% next year.

The valuations and verdict

Netflix trades at 46 times forward earnings and nine times this year's sales. Roku has a forward P/E ratio of nearly 200 (assuming it generates an adjusted profit this year) and trades at 16 times this year's sales.

Both companies face post-pandemic slowdowns, but Netflix is a more reasonably valued investment than Roku right now. Netflix's valuation seems to be depressed by competitive threats, but the world's top paid streaming video platform will likely maintain its lead after the pandemic ends.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.