SiriusXM is trading modestly above the $3.00 level and many investors are scratching their proverbial heads. What is the valuation of this company? Well, there is no easy answer on valuation other than that the company tends to be valued at between 17 and 22 times the Enterprise to EBITDA or EV/EBITDA. Currently the equity is trading at below the 17 multiple. That would imply that we are near the base and should be able to establish a foundation from which stock price appreciation can happen.
Valuation Where SIRI Typically Trades
High End Valuation
As you can see in the charts above, SIRI is trading at the low end of the spectrum currently. The equity should be able to have a comfort level at a multiple of about 20. This would bring a stock price of about $4.02. SiriusXM usually peaks around a multiple of 22, which is a stock price of $4.48.
Now, before we get too excited, we need to understand something. The top end of SiriusXM’s multiple used to be 24. It has not really hit that isn quite some time. This would imply that the street is not allowing such a high multiple anymore. I have already taken it down to 22. Is 21 appropriate? is 20? These questions will take time to play out, but I suspect that there is a shift in the way a company like SiriusXM is valued.
Watch the volume closely. The EMA chart is once again ugly. I will update that in another article this afternoon.