Sirius XM Stock Analysis – a Rising Star?

Sirius XM (SIRI) has certainly come a long way. From a struggling operation 10 years ago, Sirius XM is now looking like a contender. They looked like they have gotten their act together is the future looks bright for them. I found this stock because I noticed that it’s one of the most heavily traded stock on NYSE with more than 60,000,000 shares changing hands. That’s a high volume counter. So let’s investigate further with our detailed Sirius XM Stock Analysis to see if this one deserves a place in our watch list.

As always, my goals with this Sirius XM Stock Analysis is to keep things simple and straightforward with no bias. Remember to leave a comment at the end of this analysis….

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Sirius XM Stock Analysis – Business Snapshot

Sirius XM Stock Analysis - Business SnapshotSirius XM Stock Analysis – Business Snapshot

Sirius XM is a digital entertainment company starting from a humble beginning to now supposedly the largest radio company (by revenue), boasting over 30 million subscribers (wow!). All looking pretty good for XM… the only problem I feel with this industry is that the subscription fees will always come under pressure because competitors will try to slash price in order to gain market share. I might be wrong but looking at historical trends of companies in this industry, it’s a concern and it’s a cut throat industry. Telco companies for example suffered from aggressive price war; hence my reservation on Sirius XM business model… Let’s dive deeper into their financials for a clearer picture.

Sirius XM Stock Analysis – Earnings Per Share

A strong sign of a growing company lies in their EPS growth. No EPS growth equals to no stock price increase – it’s simple as that. So let’s take a close look into Sirius XM EPS history.

Sirius XM Stock Analysis - 10 year Earnings Per Share
Sirius XM Stock Analysis – 10 year Earnings Per Share History

2006 to 2009 were losing years for Sirius XM but since then, it’s been consistent and pretty impressive except in 2012 there was a spike in EPS (not quite sure why). We should just take that as a one off. The more reliable EPS is showing at about 0.09 cents per share. $0.01 in 2011 to $0.09 in 2015 is impressive and they are doing something right in their business and its showing in their Financials. I like the way this is looking…

Sirius XM Stock Analysis – Debt Equity Ratio

Sirius XM Stock Analysis - Debt Equity Ratio
Sirius XM Stock Analysis – Debt Equity Ratio

Zero debts! Good going Sirius XM. This is the type of company that I like to be invested in….

Sirius XM Stock Analysis – Return on Equity

Sirius XM Stock Analysis - 10 year Return on Equity Track Record
Sirius XM Stock Analysis – 10 year Return on Equity Track Record

The ROE % is all over the place like a roller coaster. Although I prefer a little more consistency, it’s acceptable with the last ROE coming in at 89%. For more conservative approach, we should only take it as 24% instead.

Sirius XM Stock Analysis – Operating Cash Flow

Sirius XM Stock Analysis - Operating Cash FlowSirius XM Stock Analysis – Operating Cash Flow

Sirius XM is getting pretty serious. Look at the healthy growth in its operating cash flow since 2011. The company is certainly growing strong with the right fundamentals. It’s looking like it deserves a place in our watch list.

Should You Buy Sirius XM Stocks?

Sirius XM looks good although I am a little uncertain about their business model. However, looking at their financial data, it looks good and this is certainly one stock I will be watching. And you probably should as well. Since 2011, Sirius XM is making really good progress and all signs are pointing up. As usual, while it might be showing signs of maturing into a solid company, we cannot get carried away because our goal is to always get into position at a fire sale price. Companies have to be undervalued for us to get in… if not, then we increase our risk. Below is my valuation of Sirius XM.

Should You Buy Sirius XM Stock Should You Buy Sirius XM Stocks?

At the point of this writing, SIRI is priced at $3.90 which is way too high as compared to my valuation. The fundamentals is just not supporting this price and I, for one, am not a big fan of putting too much weightage on too much growth as its too risky. My guess is that the market expects high growth from SIRI… any missed earnings will spell trouble with this approach. I prefer a more conservative and safer approach which has served me well for so long. It’s good to be patient and I strongly suggest that you stay on the sideline for this…

Good luck and please leave a comment below as I love to hear from you.



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