A good idea for strong potential returns is to invest behind broad secular trends that are experiencing rapid growth. Technology is having an impact on consumer behavior, and the smartest investors can spot these changes and improve their portfolios. 

Readers are certainly familiar with the streaming industry. While companies like Netflix and Walt Disney get a lot of attention, investors should turn their attention to a much smaller industry player like Roku (ROKU 1.29%). 

Despite skyrocketing 114% in 2023, the stock is down 82% from its peak price (as of Aug. 7). And it now sells at an attractive price-to-sales ratio of 3.8, below the stock's historical average of 10.7. Besides the cheap valuation, here's why Roku is worthy of investment consideration today. 

Waiting for a recovery 

It's been well-publicized that the digital ad market has been hitting a rough patch since the start of 2022. With fears of a potential recession still looming, spending on advertising isn't a priority like it might be in robust economic times. This hurts a company like Roku, which generates sizable revenue from ad sales. 

Even though the management team's outlook calls for difficult market conditions to persist throughout the rest of the year, there are some encouraging signs that investors can point to. The second-quarter 2023 shareholder letter mentioned that certain industries, like consumer-packaged goods and health and wellness, are reporting stronger ad spending. Alphabet and Meta Platforms, the giants in the digital ad industry, reported accelerating revenue gains in their latest quarters. 

What's more, the chances of a severe recession around the corner might be dwindling. The unemployment rate is low, the labor market is strong, and consumer confidence has been trending upward since the summer of last year. This could lead to optimistic executive teams increasing their spending on Roku. 

The good news, though, is that the economy spends substantially less time shrinking than it does expanding. So, it's only a matter of time until the digital advertising industry, which is somewhat cyclical, gets back on track toward its potential $1.4 trillion revenue opportunity by 2030. 

Roku's Platform segment, where ad revenue is included, saw revenue jump 11% versus the second quarter of last year. And for the current quarter, the forecast is for overall company sales to rise by 7%. That's still a healthy rate of expansion that is much better than the 9% decline in ad spending on traditional TV in the U.S. last quarter. 

It's impressive that these headwinds didn't stop Roku from growing its active account base by 16% year over year to 73.5 million users. Viewership remains strong, as 25.1 billion hours of content were streamed on the platform last quarter. These figures indicate that Roku has a long growth runway in front of it. 

Three-sided ecosystem 

At a high level, Roku is a platform that connects viewers with their favorite shows and movies, content companies trying to reach consumers, and advertisers looking to target a massive audience. In other words, it's a three-sided ecosystem that benefits from network effects, a powerful competitive advantage. 

It's like a flywheel effect. Roku consolidates all the popular streaming apps in one place, a valuable offering that naturally attracts more active accounts over time. These active accounts have already shown that they watch an increasing amount of content on the platform. The average Roku account streamed nearly four hours of content on their TVs per day in Q2. 

A growing user base, coupled with a more engaged user base, is exactly what advertisers love to see. Roku's platform should get more and more valuable, generating greater revenue as it gets bigger. It would be almost impossible for a start-up company to create what Roku has if starting from scratch. 

With the long-term tailwind of streaming's growth working in its favor, Roku's business is in a prime position to perform well over time. And this should be enough to drive shares higher.