The coronavirus pandemic was a boon to certain industries, especially the streaming sector. Consumers who were stuck at home turned to video entertainment, and Roku (ROKU 0.59%) was a huge beneficiary, as its stock soared 148% in 2020. 

But softer macro conditions and tough comparisons, coupled with a general risk-off sentiment from investors, have punished the business. And as of this writing, shares of Roku are down 87% from their all-time high set in July 2021. Even still, here's why it's a growth stock you might want to consider buying right now. 

Posting growth amid macro weakness 

There's no denying that Roku's operations faced a serious slowdown in 2022, with revenue rising 13% year over year, a big decline from 55% growth in 2021. The last three months of last year showed an even sharper slowdown, with sales of $867.1 million essentially unchanged from the fourth quarter of 2021. Management cited the weaker macro environment, which not only reduced Roku's hardware sales, but also hurt the ad market. Ad sales in the U.S. fell 12% year over year in the month of December. 

Despite these developments, Roku was able to increase active accounts 16%, hours streamed 23%, and average revenue per user 2% from a year ago. The fact that the company was still able to post these gains in its three key metrics at a time when the digital ad market is under intense pressure speaks to Roku's solid competitive positioning, and it's still in expansion mode. In fact, this competitive positioning will allow Roku to benefit over the long term as more dollars shift from linear TV to a connected-TV ecosystem, as the company commands leading market share of 33% of smart-TV operating systems in the U.S. 

There are two important factors that are helping this favorable scenario. One is the ongoing cord-cutting trend, resulting in a greater number of households choosing to get all of their video entertainment from streaming services, as opposed to the traditional cable TV bundle. Moreover, the introduction of cheaper, ad-based services can be a catalyst for continued revenue growth for Roku and its platform. 

An undemanding valuation 

Because Roku's stock has been so hammered, it now trades at a price-to-sales multiple of about 2.8. This is substantially lower than the stock's historical average. And it demonstrates the amount of pessimism that has surrounded the business, though to be sure the shares are up 58% so far in 2023. 

Other companies that operate in the digital ad sector, like Alphabet, Meta Platforms, and Snap, have seen their share prices fall well below their highs as well. This should give Roku shareholders some relief to know that the stock's drop isn't necessarily company-specific. And when the digital ad market does turn around, Roku should stand to benefit. 

One thing that investors need to pay attention to, however, is Roku's lack of profitability. In 2022, the company posted a net loss of $498 million, compared to a profit of $242 million in 2021. What's kind of alarming is that operating expenses jumped 68% last year, significantly outpacing top-line growth. To be fair, management did make the goal of achieving positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2024. But investors should always be a bit wary of any adjusted figures, as they can exclude real and recurring expenses.  

For me, 2022 was a lesson in prioritizing businesses that are in sound financial positions, particularly because no one knows when the broader economy will take a turn for the worse. That said, if you are comfortable owning a company that still hasn't found its way to consistent profitability, but is nonetheless still a pioneer in its industry with the potential for lots of growth in the future, then it might make sense to seriously consider adding Roku to your portfolio. The attractive beaten-down valuation certainly helps support a bullish case for the stock. 

It's up to investors to figure out whether the positive characteristics outweigh the unfavorable traits.