Eugene David
...The One-Minute Pundit

Tuesday, May 03, 2011


The fundamental progress at Sirius XM is undeniable. Its fourth-quarter operating margin widened from 13% to 18%. The cash balance jumped 53% to $587 million. But Sirius's quick ratio, a liquidity measure, remained poor at 0.3 and its debt-to-equity ratio, at more than 15, indicates excessive leverage. Risks abound.

Yet, Sirius continues to attract shareholders. Its stock, among the best-performing U.S. mid-caps of 2010, with a 173% return, is now expensive. Sirius trades at a forward-earnings multiple of 40 and a book-value multiple of 48, respective premiums of 59% and 1,160% to cable-and-satellite industry averages. For a company that hasn't yet demonstrated sustainable profitability, these premiums are a red flag. Sirius suffered an accumulated GAAP loss of $2.14 a share in 2008 and 15 cents in 2009. It broke even in fiscal 2010, but shareholders' equity climbed into positive territory as the float inched up 1.2%. During the fourth quarter, Sirius suffered an $81 million GAAP net loss.


THE WALL STREET CASINO STOCK OF THE YEAR!


(Also via I Want Media)

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