Sirius Xm Financial Analysis

Sirius XM Radio Financial Statement Analysis

In the previous project assigned to me, I completed a SWOT analysis of Sirius XM Radio where it was noted that the Sirius XM is firmly at the top of its industry. For the purposes of this project, I went through the financial statements of Sirius XM as well as computed several key financial ratios to indicate Sirius XM’s profitability, growth, performance, and efficiency amongst other things. I then compared these ratios to the industry averages as well as with Sirius XM’s top competitors. After completing this close analysis, I found that although Sirius XM is enjoying incredible growth and a strong place in the market, there are still several flags that an investor should still note.

The very first fact that I noticed about Sirius XM’s radios financial statements was its incredibly large revenue. When compared to its competitors, there is essentially no competition, with Sirius XM posting revenues of over $3 billion for each of the past two years. The closest competitor to Sirius in the radio broadcasting market in terms of revenue was Cumulus Media, which had posted revenues just over $1 billion in 2012 and $550 million in 2011. Sirius XM has also shown consistent growth of its revenue since the merger in 2008. Over the past 3 years Sirius XM has seen its revenue grow by 14%, 7%, and 13%, which can is a significant amount due to the fact that Sirius XM’s revenues are in the billions. In addition to the growth in revenue, Sirius XM has seen a consistent growth in net income over the years as well.

One issue with these facts that I quickly noticed upon analyzing the financials of Sirius XM is that Sirius XM relies heavily on subscribers to post its revenue. The subscription revenue accounts for over 85% of Sirius XM’s total revenues. As stated in the previous analysis of Sirius XM, it relies heavily on the auto industry for its subscribers, with new cars or leases usually coming with a pre-paid membership to...