Shares of Sirius XM (SIRI) were up slightly Tuesday and have now gained 25% so far this year. Sirius XM is still is trading well below its all-time highs from 2000. But the company has enjoyed a remarkable rebound after many investors left it for dead during the worst of the Great Recession three years ago.
Sirius XM has finally become a company that generates real profits. You can actually value the stock with tried and true metrics like a price-to-earnings ratio. On that basis, Sirius XM still looks a tad expensive ... but not absurdly so.
Shares trade at 32 times 2012 earnings estimates. That's a lot pricier than the broader market, not to mention tech giants like Apple (AAPL, Fortune 500) and Google (GOOG, Fortune 500).
Sirius XM also trades at a premium to other pure play publicly traded radio companies like CC Media Holdings (CCMO, Fortune 500) (the old Clear Channel) and Cumulus Media (CMLS) as well as media giant CBS (CBS, Fortune 500), which has a big radio operation.
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But analysts do expect earnings to grow at a nearly 20% clip a year, on average, for the next few years. John Tinker, an analyst with Maxim Partners in New York, wrote in a report Tuesday that Sirius XM deserves a higher valuation than traditional radio companies due to its better growth prospects.
Sirius XM faces a potential battle with Liberty, which last month requested approval from federal regulators to take de facto control of Sirius XM now that restrictions on its stake have expired.
Liberty executives have said the company could boost its stake above 49.9 percent. It already holds five of Sirius XM's 13 board seats.
Karmazin said on the conference call that he did not think the Federal Communications Commission would side with Liberty.
"We believe the FCC will conclude based on precedent that a 40 percent shareholder, even one with influence, is not in de facto control," Karmazin said.
But he also said he had not heard from the FCC and did not know what Liberty Media planned to do besides keep its options open.
He said Sirius XM would protect its shareholders if Liberty did take control of the company. He said Sirius XM was not currently "combative" with Liberty.
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