The buyout of Pandora boosting revenue
Over the past five years the company’s annual revenues have grown by almost 86% which is equivalent to a CAGR of 13%. During this time the acquisition of Pandora accounted for most of the company’s revenue and last year it added $1.6 billion to Sirius sales. However without the buyout of Pandora, Sirius’ growth will have been only 8% over the period.
Although the company has grown revenue it is still far from matching media stocks like Spotify (NYSE:SPOT) and Netflix (NASDAQ:NFLX) that have been creating impressive revenues. Stocks such as Netflix and Spotify are currently trading at exceptional valuations due to their incredible revenue growth trends.
Sirius is a mature slow-growing stock
Sirius stock has a modest valuation which is 3X trailing sales or 23X trailing earnings like most mature and slow-growing stocks in the retail industry. For instance no investor will expect Kellogg’s (NYSE:K) or Colgate-Palmolive (NYSE:CL) to return massive returns for a small investment and this is actually where Sirius is sitting today. Although the veteran satellite radio pays dividends, its 1% yield is below what you will get from Kellogg’s and Colgate at 3.8% and 2.5% respectively.
Despite more people turning to digital content during this coronavirus period it has not been a bullish case for the company. Sirius only added 69,000 new paying subscribers in Q1 which is a decline from the 131,000 reported a year ago. Interestingly most of the subscriber growth for Sirius was from trials incorporated in car sales but the automotive industry has been hit hard during the pandemic.
Sirius is a stock that one will need to invest in and wait for years for the investment to return massive returns. Interestingly there are safer and quicker ways of growing one’s investment than Sirius.