Sirius XM Holdings Inc (SIRI)

[jestme4now]

Sirius XM Holdings (NASDAQ:SIRI) is looking more and more like a classic value stock as defined by Ben Graham and Warren Buffett.

The primary criteria for such a company are that it has a low share price, meaning it is undervalued by Mr. Market; a business model that constantly generates significant revenue and cash flow, or float; and has a wide moat to protect it from competitors. Buffett would probably add baggage that gives the company a lack of respect from average investors.

Why Sirius Looks Like a Classic Value Play

If you take a close look at it, Sirius meets all of those criteria and even seems to exceed some of them. Here is some food for thought:
•Sirius has a very low share price; it was trading at $3.605 a share on August 29, 2014. Yet it reported a market cap of $20.57 billion, a TTM revenue figure of $3.99 billion, and a quarterly free cash flow of $310.87 million. Sirius' second-quarter results, released on July 29, 2014, showed a number that was even higher: $4.1 billion. That certainly sounds like an undervalued stock to me.
•Sirius' subscription business model gives it a lot of float. Sirius reported subscriber revenues of around $1.73 billion for the first six months of 2014. My fellow Seeking Alpha Contributor Crunching Numbers estimated that the subscription revenue was $131.536 million, or 8% higher than the number reported for the first six months of 2013, which was $1.598 billion. Sirius currently has around 26.3 million subscribers, and it added 475,472 subscribers in the second quarter of 2014.
•Sirius has a very wide moat because it is the only satellite radio company currently operating in North America. It has the ability to beam audio content directly into the place where most Americans and Canadians listen to it: the automobile. Sirius' main competitor, Pandora Media (NYSE:P), has 77 million listeners, but it has no float because it does not charge subscriptions. Instead, it is trying to make money by selling advertising.
•Sirius has made serious efforts to widen its moat by creating exclusive content through its channels. It has also tried to offer content that Pandora does not, such as comedy, sports, and commentary.
•Pandora appears overpriced when compared to Sirius. On August 29, 2014, Pandora was trading at $26.88 a share. Yet it reported a TTM revenue of $750.94 million, a free cash flow of -$11.67 million, and a market cap of $5.586 billion.
•Sirius also offered investors a very good return on equity of 13.12% on June 30, 2014. Pandora reported a return on equity figure of -$14.92% on the same day.
•There is one classic value measurement where Sirius does poorly. On June 30, 2014, it reported a debt to equity ratio of 3.112% compared to .939% in June 2013. To be fair, that might be a one-time expense related to the complex deal that Liberty Media (NASDAQ:LMCA) used to buy around half of Sirius last year.

http://seekingalpha.com/article/2462755-sirius-xm-looks-like-a-classic-value-play