Sirius XM Holdings Inc. (NASDAQ:SIRI) shares are up more than 15.11% this year and recently decreased -0.32% or -$0.02 to settle at $6.17. Shopify Inc. (NYSE:SHOP), on the other hand, is up 15.78% year to date as of 04/16/2018. It currently trades at $116.94 and has returned -1.69% during the past week.
Sirius XM Holdings Inc. (NASDAQ:SIRI) and Shopify Inc. (NYSE:SHOP) are the two most active stocks in the Broadcasting – Radio industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.Growth
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect SIRI to grow earnings at a 24.94% annual rate over the next 5 years. Comparatively, SHOP is expected to grow at a 19.00% 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. Sirius XM Holdings Inc. (SIRI) has an EBITDA margin of 35.35%. This suggests that SIRI underlying business is more profitable SIRI’s ROI is 22.30% while SHOP has a ROI of -4.80%. The interpretation is that SIRI’s business generates a higher return on investment than SHOP’s.Cash Flow
The amount of free cash flow available to investors is ultimately what determines the value of a stock. On a percent-of-sales basis, SIRI’s free cash flow was 0% while SHOP converted 0% 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 are important because they reveal the financial health of a company. SIRI has a current ratio of 0.20 compared to 10.80 for SHOP. This means that SHOP can more easily cover its most immediate liabilities over the next twelve months.Valuation
SIRI trades at a forward P/E of 22.11, and a P/S of 5.14, compared to a forward P/E of 232.02, a P/B of 11.64, and a P/S of 17.88 for SHOP. SIRI is the cheaper of the two stocks on an earnings, book value and sales basis. 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
When investing it’s crucial to distinguish between price and value. As Warren Buffet said, “price is what you pay, value is what you get”. SIRI is currently priced at a -0.64% to its one-year price target of 6.21. Comparatively, SHOP is -19.7% relative to its price target of 145.63. This suggests that SHOP is the better investment over the next year.
Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. SIRI has a short ratio of 10.26 compared to a short interest of 2.91 for SHOP. This implies that the market is currently less bearish on the outlook for SHOP.Summary
Sirius XM Holdings Inc. (NASDAQ:SIRI) beats Shopify Inc. (NYSE:SHOP) on a total of 7 of the 14 factors compared between the two stocks. SIRI is growing fastly, is more profitable, generates a higher return on investment and has lower financial risk. In terms of valuation, SIRI is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, ETFC has better sentiment signals based on short interest.