At first sight, Roku (ROKU -0.35%) seems like a stock to avoid. Shares are down 87% from their 2021 peak, for example, and still within sight of their early 2023 lows. The company is also still operating at a loss. And that’s not to mention the fact that the streaming industry boom that Roku was built on appears to be coming to an end.

There are two important investment pieces of advice to remember, however. First, there is often more to it than meets the eye. Second, stocks ultimately reflect the likely future of the underlying company rather than its past.

When you embrace both concepts, Roku stock suddenly seems like an attractive addition to the growth portfolios of risk-taking investors.

What is Roku anyway?

In case you’re reading this and aren’t familiar, Roku makes and licenses devices that “stream” digital video from services like Netflix or Walt Disney‘s Hulu. It is the most widely used connected television platform in the United States, serving as a technology intermediary for 81.6 million households as of the end of March. Most of those users are in the U.S., though the company also serves a handful of customers abroad.

But it’s not really about streaming boxes or smart TVs. Those are just means to an end. Roku’s main profit center is advertising, which accounts for 85% of revenue and all profits. Roku is more of a tollbooth. Once people subscribe to Netflix, Walt Disney’s Disney+ or another streaming service, they need a device to watch that streaming programming. Roku provides those devices and charges a nominal fee to the company that provides the programming.

The monetization of Roku’s platform doesn’t stop there. Brands of all kinds can also pay to have their goods, services, and even their brand names featured on the devices’ home screens and screensavers.

Roku is even getting into the streaming industry’s newest and hottest growth engine. That’s free, ad-supported television, or FAST. Roku operates its own streaming channel — called The Roku Channel — that occasionally injects TV commercials into its programming.

All this contributes to an ever-increasing turnover.

Right place, right time, right platform

What this ever-growing revenue has not yet produced is consistent profit, which is likely why the stock has underperformed since the rally during and because of the COVID-19 pandemic.

As noted, a company’s past doesn’t necessarily mean its future. In this case, it probably isn’t. Based on current trends and trajectories in the streaming industry, the analyst community is calling for Roku to become profitable in 2027, which should then increase in 2028.

There is no reason to doubt this optimistic outlook.

Investors who have been watching the streaming industry will likely recognize that it has hit a growth wall of sorts. That’s why we’re now seeing strange bedfellows forming once unlikely partnerships. Netflix is ​​now bundling its service with Apple‘s Apple TV+ and ComcastPeacock, for example, while Walt Disney’s Disney+ and Hulu can be purchased at a discount if purchased together with Discovery of Warner Bros.‘s Max (formerly HBO Max). These companies are clearly looking for new ways to revive their stagnant growth. The launch of ad-supported versions of Netflix and Max point to the same concern.

But Roku isn’t in the same boat as the studios and brands that create the content you watch. You still need a way to watch it, and they still need a way to deliver it. Roku’s strong hold on its position as the primary intermediary in the market is not under threat.

In fact, Roku is actually benefiting from consumers’ subscription fatigue, which is driving them toward free-to-view, ad-supported programming. Data from television ratings agency Nielsen indicates that while The Roku Channel doesn’t get anywhere near the viewing time of market leader Netflix in the U.S., it does is rapidly growing its share at this time (largely at Peacock’s and Amazon Prime costs). In June, Americans actually spent more time watching The Roku Channel than they did Max or the free-to-air Pluto TV, and spent nearly as much time watching The Roku Channel as they did Disney+ or the free-to-air Tubi. That’s impressive.

There’s plenty of more growth to come for Roku on this particular front. Industry research firm Digital TV Research suggests that the global free-ad-supported TV business will grow from $7.6 billion last year to $16.5 billion in 2029, with the United States poised to remain the global industry’s largest market.

Roku stock offers more return than risk

There are certainly risks here.

Perhaps the greatest of these risks is Walmart‘s plan to acquire smart TV maker Visionthat has developed its own ad-focused smart TV operating system. While it’s not yet clear what Walmart could do with Vizio that isn’t already being done, it would be naive to suggest that it doesn’t pose a potential threat to Roku’s reach. In fact, Walmart’s official announcement highlighted Vizio’s relationships with more than 500 advertisers and more than 18 million users of its televisions.

Roku is also still losing money. While the current trajectories of its top and bottom lines should pull it out of the red and into the black in the near future, that path isn’t entirely paved or straight.

These potential pitfalls aren’t huge risks, though. They’re also largely baked into Roku’s current share price. The only new major caveat we can offer interested investors right now is to simply be prepared for continued volatility.

This may help: Analysts’ consensus price target of $76.24 is 22% above Roku’s current share price.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has positions in Warner Bros. Discovery. The Motley Fool has positions in and recommends Amazon, Apple, Netflix, Roku, Walmart, Walt Disney and Warner Bros. Discovery. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.