Sirius XM Holdings Inc. (NASDAQ:SIRI) shares are up more than 13.62% this year and recently increased 2.18% or $0.13 to settle at $6.09. Symantec Corporation (NASDAQ:SYMC), on the other hand, is down -3.71% year to date as of 02/14/2018. It currently trades at $27.02 and has returned 1.66% during the past week.
Sirius XM Holdings Inc. (NASDAQ:SIRI) and Symantec Corporation (NASDAQ:SYMC) are the two most active stocks in the market based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect SIRI to grow earnings at a 23.32% annual rate over the next 5 years. Comparatively, SYMC is expected to grow at a 10.15% annual rate. All else equal, SIRI’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. , compared to an EBITDA margin of 20.32% for Symantec Corporation (SYMC). SIRI’s ROI is 18.80% while SYMC has a ROI of -0.60%. The interpretation is that SIRI’s business generates a higher return on investment than SYMC’s.
If there’s one thing investors care more about than earnings, it’s cash flow. SIRI’s free cash flow (“FCF”) per share for the trailing twelve months was +0.09. Comparatively, SYMC’s free cash flow per share was +0.32. On a percent-of-sales basis, SIRI’s free cash flow was 7.44% while SYMC converted 4.95% of its revenues into cash flow. This means that, for a given level of sales, SIRI is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. SIRI has a current ratio of 0.20 compared to 1.20 for SYMC. This means that SYMC can more easily cover its most immediate liabilities over the next twelve months.
SIRI trades at a forward P/E of 21.83, and a P/S of 5.19, compared to a forward P/E of 14.93, a P/B of 3.37, and a P/S of 3.53 for SYMC. SIRI is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. SIRI is currently priced at a -2.25% to its one-year price target of 6.23. Comparatively, SYMC is -9.75% relative to its price target of 29.94. This suggests that SYMC is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.40 for SIRI and 2.70 for SYMC, which implies that analysts are more bullish on the outlook for SYMC.
Risk and Volatility
No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. SIRI has a beta of 1.07 and SYMC’s beta is 0.89. SYMC’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. SIRI has a short ratio of 9.88 compared to a short interest of 2.50 for SYMC. This implies that the market is currently less bearish on the outlook for SYMC.
Symantec Corporation (NASDAQ:SYMC) beats Sirius XM Holdings Inc. (NASDAQ:SIRI) on a total of 7 of the 14 factors compared between the two stocks. SYMC is growing fastly and higher liquidity. In terms of valuation, SYMC is the cheaper of the two stocks on an earnings and sales basis, SYMC is more undervalued relative to its price target. Finally, SYMC has better sentiment signals based on short interest.