The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.
If this kind of company isn’t your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Sirius XM Holdings (NASDAQ:SIRI). While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.
Our analysis indicates that SIRI is potentially undervalued!
How Quickly Is Sirius XM Holdings Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Sirius XM Holdings grew its EPS by 13% per year. That growth rate is fairly good, assuming the company can keep it up.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Sirius XM Holdings achieved similar EBIT margins to last year, revenue grew by a solid 5.8% to US$8.9b. That’s progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
You don’t drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Sirius XM Holdings’ future profits.
Are Sirius XM Holdings Insiders Aligned With All Shareholders?
Owing to the size of Sirius XM Holdings, we wouldn’t expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. With a whopping US$66m worth of shares as a group, insiders have plenty riding on the company’s success. That’s certainly enough to let shareholders know that management will be very focussed on long term growth.
Is Sirius XM Holdings Worth Keeping An Eye On?
One positive for Sirius XM Holdings is that it is growing EPS. That’s nice to see. If that’s not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. We should say that we’ve discovered 3 warning signs for Sirius XM Holdings (2 can’t be ignored!) that you should be aware of before investing here.
There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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Read More: With EPS Growth And More, Sirius XM Holdings (NASDAQ:SIRI) Makes An Interesting Case