Sirius XM Holdings Inc. (NASDAQ:SIRI) shares are up more than 30.97% this year and recently decreased -0.28% or -$0.02 to settle at $7.02. Monster Beverage Corporation (NASDAQ:MNST), on the other hand, is down -5.88% year to date as of 07/10/2018. It currently trades at $59.57 and has returned 3.46% during the past week.
Sirius XM Holdings Inc. (NASDAQ:SIRI) and Monster Beverage Corporation (NASDAQ:MNST) are the two most active stocks in the Broadcasting – Radio industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.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 26.70% annual rate over the next 5 years. Comparatively, MNST is expected to grow at a 15.69% annual rate. All else equal, SIRI’s higher growth rate would imply a greater potential for capital appreciation.Profitability and Returns
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. 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 36.52% for Monster Beverage Corporation (MNST). SIRI’s ROI is 22.30% while MNST has a ROI of 22.10%. The interpretation is that SIRI’s business generates a higher return on investment than MNST’s.Cash Flow
Cash is king when it comes to investing. SIRI’s free cash flow (“FCF”) per share for the trailing twelve months was +0.06. Comparatively, MNST’s free cash flow per share was +0.24. On a percent-of-sales basis, SIRI’s free cash flow was 4.96% while MNST converted 4.01% 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 3.80 for MNST. This means that MNST can more easily cover its most immediate liabilities over the next twelve months.Valuation
SIRI trades at a forward P/E of 25.25, and a P/S of 5.51, compared to a forward P/E of 30.56, a P/B of 8.70, and a P/S of 9.51 for MNST. 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
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 4.15% to its one-year price target of 6.74. Comparatively, MNST is -1.88% relative to its price target of 60.71. This suggests that MNST is the better investment over the next year.
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 1.06 and MNST’s beta is 1.34. SIRI’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
Analysts often look at short interest, or the percentage of a company’s float currently being shorted by investors, to aid in their outlook for a particular stock. SIRI has a short ratio of 12.74 compared to a short interest of 3.09 for MNST. This implies that the market is currently less bearish on the outlook for MNST.Summary
Monster Beverage Corporation (NASDAQ:MNST) beats Sirius XM Holdings Inc. (NASDAQ:SIRI) on a total of 7 of the 14 factors compared between the two stocks. MNST is growing fastly, has higher cash flow per share, higher liquidity 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, MNST is more undervalued relative to its price target. Finally, MNST has better sentiment signals based on short interest.