(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

CBS Corp.'s (CBS) stock has plunged over the past couple of weeks, falling nearly 8% since July 27. The decline occurred after reports surfaced regarding allegations of sexual misconduct of its long-time CEO Leslie Moonves. But some options traders are betting the recent plunge in the stock won't last and that it will rise by 9% from its current price around $52.80. (For more, see also: CBS Stock Could Rally After Viacom Takeover.)

The company posted better than expected second-quarter results on August 2. Earnings climbed by more than 15%, topping estimates by just 1%, while revenue came in-line. Although it is not clear, traders may be betting that the stock's strong fundamentals and cheap valuation will help shares rebound over the short term. 

CBS Chart

CBS data by YCharts

Traders Bet on 9% Rise

The $55 strike price call options set to expire on November 16 have seen their open interest rise by about 11-times, to 11,400 since August 2. With the calls trading at a price of approximately $2.40, the buyer of the options would need shares of CBS to rise by roughly 9% to $57.40 to break even if holding them until expiration. Should that happen, the stock would nearly recoup all the losses it has suffered since July 27. 

Strong Earnings Growth

The bullish view may be a result of the company's strong growth, most notably from its direct to consumer streaming services. Because of that growth, analysts are looking for the coming third-quarter to be robust too. The strong quarterly growth spills over to the full-year, with profits seen rising by more than 25%, followed by a jump of 12% in 2019, and almost 17% in 2020. (For more, see also: CBS Set to Report Earnings Under Negative Charts.)

CBS Quarterly EPS Estimates Chart

Cheapest Valuation in Years

The stock is currently trading at its lowest valuation in some time, at just nine times 2019 earnings estimates, nearly half that of the S&P 500. From 2015 to the start of 2018 the stock has historically traded in a range of 10 to 14.5 times one-year forward earnings estimates. 

Fundamental Chart Chart

Despite the strong growth outlook, the stock has had a tough time dropping by nearly 24% since peaking in the spring of 2017, as optimism surrounding a potential merger with Viacom Inc. (VIA) faded. 

It would seem some traders are betting that CBS's strong fundamentals will be enough to lift the stock over the short term, despite the current turmoil. But that also means the company will need to deliver strong results, to keep the confidence of investors, and giving the stock a chance to rise. 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.