Paramount (PSKY)

Multinational media and entertainment corporation Paramount (NASDAQ:PARA) fell short of the markets revenue expectations in Q3 CY2025, with sales flat year on year at $6.70 billion. Its non-GAAP loss of $0.12 per share was significantly below analysts’ consensus estimates.

Company Overview

Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ:PARA) is a major media conglomerate offering television, film production, and digital content across various global platforms.

Broadcasting companies have been facing secular headwinds in the form of consumers abandoning traditional television and radio in favor of streaming services. As a result, many broadcasting companies have evolved by forming distribution agreements with major streaming platforms so they can get in on part of the action, but will these subscription revenues be as high quality and high margin as their legacy revenues? Only time will tell which of these broadcasters will survive the sea changes of technological advancement and fragmenting consumer attention.

Competitors in the media and entertainment production industry include Disney (NYSE:DIS), Warner Bros. Discovery (NASDAQ:WBD), and Comcast (NASDAQ:CMCSA).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Paramount’s sales grew at a weak 2.8% compounded annual growth rate over the last five years. This was below our standards and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Paramount’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2.4% annually.

We can better understand the company’s revenue dynamics by analyzing its three most important segments: TV Media, Direct-to-Consumer, and Filmed Entertainment, which are 56.6%, 32.3%, and 11.2% of revenue. Over the last two years, Paramount’s TV Media revenue (broadcasting) averaged 8.6% year-on-year declines, but its Direct-to-Consumer (streaming) and Filmed Entertainment (movies) revenues averaged 16.1% and 2.4% growth.

This quarter, Paramount missed Wall Street’s estimates and reported a rather uninspiring 0.4% year-on-year revenue decline, generating $6.70 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 4% over the next 12 months. Although this projection implies its newer products and services will spur better top-line performance, it is still below the sector average.

Paramount’s operating margin has been trending up over the last 12 months, but it still averaged negative 6.2% over the last two years. This is due to its large expense base and inefficient cost structure.

This quarter, Paramount generated an operating margin profit margin of 4.8%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Paramount, its EPS declined by 34.3% annually over the last five years while its revenue grew by 2.8%. This tells us the company became less profitable on a per-share basis as it expanded.

In Q3, Paramount reported adjusted EPS of negative $0.12, down from $0.49 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Paramount’s full-year EPS of $0.52 to grow 58.9%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Paramount has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.1%, lousy for a consumer discretionary business.

Paramount broke even from a free cash flow perspective in Q3. The company’s cash profitability regressed as it was 3 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

Over the next year, analysts predict Paramount’s cash conversion will fall to break even. Their consensus estimates imply its free cash flow margin of 1.1% for the last 12 months will decrease by 1.2 percentage points.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Paramount historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 2.1%, lower than the typical cost of capital (how much it costs to raise money) for consumer discretionary companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Paramount’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Paramount reported $3.26 billion of cash and $14.73 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.87 billion of EBITDA over the last 12 months, we view Paramount’s 4.0× net-debt-to-EBITDA ratio as safe. We also see its $722 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Paramount beat analysts’ EBITDA expectations this quarter. We were also happy its Direct-to-Consumer revenue narrowly outperformed Wall Street’s estimates. On the other hand, its Filmed Entertainment revenue missed and its TV Media revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $16.90 immediately after reporting.

Updated: December 4, 2025 at 9:56 PM EST

Are you wondering whether to buy Paramount or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

We cheer for all companies serving everyday consumers, but in the case of Paramount, we’ll be cheering from the sidelines. To begin with, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its Forecasted free cash flow margin suggests the company will ramp up its investments next year. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

Paramount’s P/E ratio based on the next 12 months is 18.5x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $14.47 on the company (compared to the current share price of $14.85).