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Summary

  • The stock is fairly valued, based on 2015 earnings estimates and earnings growth potential.
  • The company is about to issue senior notes, of which some of the proceeds may be used to pay a dividend.
  • Only 26% of all cars on the road right now have SiriusXM installed, which provides lots of room for growth.

The last time I wrote about Sirius XM Holdings Inc. (NASDAQ:SIRI), I stated, "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." Since the last article, it has gained 0.96% versus the 1.8% gain the S&P 500 (NYSEARCA:SPY) posted. Sirius 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 April 24, 2014, the company reported first-quarter earnings of $0.02 per share, which was in line with the consensus of analysts' estimates. Since 18th November, 2013, the company's stock is down 18.39% and is losing to the S&P 500, which has gained 4.45% 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 8.11% 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.

Fundamentals

The company currently trades at a trailing 12-month P/E ratio of 52.5, 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 25.4 is currently fairly priced for the future in terms of the right here, right now. The 1-year PEG ratio (1.39), 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 37.78%. The company has great near-term future earnings growth potential, with a projected EPS growth rate of 37.78%. In addition, the company has great long-term future earnings growth potential, with a projected EPS growth rate of 19.77%. Below is a comparison table of the fundamental metrics for the company for when I wrote all articles pertaining to the company.

Article Date

Price ($)

TTM P/E

Fwd P/E

EPS Next YR ($)

Target Price ($)

PEG

EPS next YR (%)

08Apr14

3.12

52.0

22.7

0.06

0.9

1.41

37.00

07May14

3.15

52.5

25.4

0.12

1.8

1.39

37.78

Financials

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 5.3%, 16.2%, 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. Below is a comparison table of the financial metrics for the company for when I wrote all articles pertaining to the company.

Article Date

Yield (%)

Payout TTM (%)

ROA (%)

ROE (%)

ROI (%)

08Apr14

N/A

N/A

5.6

15.7

9.4

07May14

N/A

N/A

5.3

16.2

9.4

Technicals

(click to enlarge)

Looking first at the relative strength index chart [RSI] at the top, I see the stock muddling around in middle-ground territory, with a current value of 45.62. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is above the red line, with the divergence bars decreasing in height, indicating bearish momentum. As for the stock price itself ($3.15), I'm looking at $3.19 to act as resistance and $2.98 to act as support for a risk/reward ratio which plays out to be -5.4% to 1.27%.

Recent News

  1. The company announced that it will issue new debt. The plan is to sell $750 million worth of senior notes due 2024, and the proceeds will be used for a variety of corporate purposes, including a possible dividend.
  2. Barrington Research thinks there's quite a bit of upside to Sirius. Barrington states 26% of the cars on the road right now have Sirius installed, and that number can double in five years to 120 million vehicles.
  3. The company added 266,000 net subscribers in the first quarter. The total paid subscriber base rose 6% from last year to 25.8 million.

Conclusion

Good news seems to be surrounding the stock these days. Fundamentally, the company is fairly valued, based on future earnings estimates and based on next year's earnings growth potential. Financially, there isn't a dividend to speak of right now, but there may be later on in time. On a technical basis, I believe the stock may have a little downside to it in the short term. Due to the bearish technicals, no dividend, and fair valuation based on earnings growth estimates, I will not be pulling the trigger here 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!

Source: Is Sirius XM A Buy Right Now With Or Without The Issuance Of A Dividend?