After reading Sirius XM Holdings Inc’s (NASDAQ:SIRI) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Sirius XM Holdings’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. Check out our latest analysis for Sirius XM Holdings
Was SIRI weak performance lately part of a long-term decline?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to assess various companies on a more comparable basis, using the most relevant data points. For Sirius XM Holdings, its most recent bottom-line (trailing twelve month) is US$647.91M, which, against the previous year’s figure, has plunged by -13.14%. Since these values may be fairly short-term, I’ve calculated an annualized five-year value for Sirius XM Holdings’s earnings, which stands at US$737.39M This doesn’t seem to paint a better picture, as earnings seem to have gradually been declining over time.
What could be happening here? Let’s examine what’s transpiring with margins and whether the entire industry is facing the same headwind. Revenue growth in the last couple of years, has been positive, however earnings growth has been declining. This suggest that Sirius XM Holdings has been growing expenses, which is hurting margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the US media industry has been growing its average earnings by double-digit 20.81% over the prior year, and a more subdued 7.67% over the past five. This suggests that whatever uplift the industry is profiting from, Sirius XM Holdings has not been able to leverage it as much as its industry peers.
What does this mean?
Sirius XM Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Usually companies that face an extended period of decline in earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and growth. I suggest you continue to research Sirius XM Holdings to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for SIRI’s future growth? Take a look at our free research report of analyst consensus for SIRI’s outlook.
- 2. Financial Health: Is SIRI’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.