Sirius XM Holdings Inc. (NASDAQ:SIRI) broadcasts its music, sports, news, talk, entertainment, traffic, and weather channels in the U.S. for a subscription fee through its proprietary satellite radio systems. On February 4, 2014, the company reported fourth quarter earnings of $0.01 per share, which missed the consensus analysts' estimates by $0.01. Since 18Nov13 the company's stock price is down 19.17% while the S&P 500 (NYSEARCA:SPY) has gained 2.6% in the same time frame. This is my second foray in the stock, and the last time I was in it I made 4.67% or 85.23% on an annualized basis. I've already purchased a batch of the stock in early February for my growth portfolio and am down 10.19% on the batch due to a bad market tape for growth stocks. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial and technical basis to see if right now is a good time to purchase more of the stock for my portfolio.
The company currently trades at a trailing 12-month P/E ratio of 52, which is expensively priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 22.77 is currently fairly priced for the future in terms of the right here, right now. The 1-year PEG ratio (1.41), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is fairly priced based on a 1-year EPS growth rate of 37%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 37%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 20.4%.
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company does not sport a dividend to speak of but is sporting return on assets, equity and investment values of 5.6%, 15.7% and 9.4%, respectively, which are all respectable values. In this particular instance, I will forego the dividend aspect of the financials because the stock is in my growth portfolio, and in the growth portfolio a stock does not have to have a dividend.
Looking first at the relative strength index chart [RSI] at the top, I see the stock is near oversold territory with a value of 33.03. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line just crossed below the red line with the divergence bars decreasing in height, indicating bearish momentum. As for the stock price itself ($3.12), I'm looking at $3.31 to act as resistance and $2.98 to act as support for a risk/reward ratio which plays out to be -4.49% to 6.09%.
- Barclays upgraded the stock in late March. Maintaining a $4 price target for the stock, Barclays upgraded the stock from "Equal Weight" to "Overweight" stating that Sirius has underperformed the overall market by roughly 20% in the past six months.
- After Liberty Media (NASDAQ:LMCA) pulled out of its offer to buy Sirius Evercore Partners decided to turn bullish on the satellite radio company. Evercore reinstated the stock with an "overweight" rating and slapped a $4.50 price target after the low-ball bid was removed.
- The company says it will resume its share buyback program now that the Liberty Media bid has been removed. The shares will be repurchased on the open market and through privately negotiated transactions through cash on hand, future cash flow from operations and future borrowings.
I feel the stock is fairly valued at this point in time and don't know if the company should be repurchasing its stock immediately. If the market keeps feeding the company easy alley-oops with price dips then by all means shares should be repurchased because the growth potential is there. Fundamentally, the company is fairly valued on next year's earnings and on next year's earnings growth potential while having great near and long-term earnings growth potential. Financially, the return ratios are solid. Technically, the stock is near oversold territory and can be due for a bounce. Due to the oversold technicals, great near-term earnings growth potential, and excellent long-term earnings growth potential I will be pulling the trigger on this name right now.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!
Disclosure: I am long SIRI, SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.