Business Has Sirius XM Holdings Inc. Possibility (NASDAQ: SIRI) 29%...

Has Sirius XM Holdings Inc. Possibility (NASDAQ: SIRI) 29% Sub-Valuation?

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((0) M sm em 1.0 em)))))) em em em)))))) em em em em em em em em em em em em em em em em em em ius ius ius ius ius ius How long is Sirius XM Holdings Inc.?NASDAQ: SIRI) its intrinsic value? Using the latest financial data, we will check whether the stock is fair by taking the expected future cash flows and discounting them to their present value. I will use the discounted Cash Flow model (DCF). It may be complicated, but in reality it is relatively simple! see if the stock has a fair price by taking the expected future cash flows and discounting them to their current value. I will use the discounted Cash Flow model (DCF). be complicated, but in reality it is quite simple!

((M b (b (em em em em em em em em em nigh nigh nigh nigh nigh) Remember, however, that there are many ways to estimate make a company value, and DCF is one method If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in Simply analyze Wall St model. "data-reactid =" 28 "> Remember, however, that there are many ways to estimate a company's value, and DCF has only one method. If you want to learn more about discounted cash flow, the reasoning can be This calculation will be read in detail in The Simply Wall St. analysis model.

"canvas-us can-text Mb (0) – mt (0) – sm Mt (0.8em) – sm" type "text" content " See our latest analysis for Sirius XM Holdings "data reactid =" 29 "> See our latest analysis for Sirius XM Holdings

The calculation

We use the model called a 2-step model, which means we have two different growth periods for the company's cash flows. The first step is generally higher growth, and the second stage is a lower growth stage. First, we need to get estimates of the next decade of cash flows. Where possible, we use analyst estimates, but when they are not available we extrapolate the previous free cash flow (TRS) from the final estimate or final reporting value. We accept that free cash flow companies will reduce their rate of contraction, and that companies with free cash flow will see their rate of growth slowly, in this period. We do this to show that there is a growing tendency in the early years than it does in subsequent years.

DCF is the idea that a future dollar is less valuable than a dollar today, so we discount the value of these future cash flows to its estimated value in today's dollars:

Free 10-year cash flow forecast (TRS) t

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Levered FCF ($, Millions) US $ 1.80b US $ 1.89b US $ 1.92b US $ 1.96b US $ 2.37b US $ 2.50b US $ 2.62b US $ 2.71b US $ 2.79b US $ 2.87b
Source of Growth Rate Estimates X8 analyzes X9 analyzes Analyzes x6 X5 analyzes X2 analyzes Est @ 5.63% Est @ 4.46% Est @ 3.64% Est @ 3.07% Est @ 2.67%
Current value ($, millions) discounted @ 7.0% US $ 1.7k US $ 1.7k US $ 1.6k US $ 1.5k US $ 1.7k US $ 1.7k US $ 1.6k US $ 1.6k US $ 1.5k US $ 1.5k

"canvas-us can-text Mb (0) – mt (0) – sm Mt (0.8em) – sm" type "text" content "("Est" = FCF estimated growth rate by Simply Wall St)
Current Value 10 Year Cash Flow (PVCF) = US $ 16b "data reactid =" 36 ">("Est" = FCF estimated growth rate by Simply Wall St)
Current Value 10 Year Cash Flow (PVCF) = US $ 16b

After calculating the present value of future cash flows in the 10-year intrinsic period, we have calculated the Terminal Value, which accounts for all future cash flows over the first phase. For a variety of reasons a very conservative growth rate is used which cannot be higher than the country's GDP growth rate. In this case, we used the 10-year government bond rate (1.7%) to consider future growth. In the same way as the growth period; 10 years, we discount the value of future cash flows at today's value, using an equity cost of 7.0%.

"canvas-us can-text Mb (0) – mt (0) – sm Mt (0.8em) – sm" type "text" content "Terminal Value (Television) t= FCF2029 × (1 + g) US (r – g) = US $ 2.9b × (1 + 1.7%) ÷ 7.0% – 1.7%) = US $ 56b "data reactid =" 38 ">Terminal Value (Television) t= FCF2029 × (1 + g) US (r – g) = US $ 2.9b × (1 + 1.7%) ÷ 7.0% – 1.7%) = US $ 56b

"canvas-us can-text Mb (0) – mt (0) – sm Mt (0.8em) – sm" type "text" content "Current Value of Terminal Value (PVTV)Television / (1 + r)10= US $ 56b ÷ (1 + 7.0%)10= US $ 29b "data reactid =" 39 ">Current Value of Terminal Value (PVTV)Television / (1 + r)10= US $ 56b ÷ (1 + 7.0%)10= US $ 29b

The total value, or equity value, is the present value of the future cash flows, which is US $ 45b. The last step is then to divide the equity value by the number of shares outstanding. Compared to the current US $ 7.1 share price, the company appears to be subject to remuneration at a 29% discount to where the stock price currently operates. Remember, however, there is only an approximate valuation, and like any complex formula – garbage, garbage.

NasdaqGS: SIRI Intrinsic value, 15 January 2020

NasdaqGS: SIRI Intrinsic value, 15 January 2020

The assumptions

We would suggest that the most important inputs for discounted cash flows are the discount rate and of course the actual cash flows. Some of the investment is in line with your own evaluation of the company's future performance, so try to make your own calculations and check your own assumptions. The DCF does not consider the possible cyclicalness of industry, nor the future capital requirements of a company, so it does not give a full picture of a company's potential performance. As we are looking at Sirius XM holdings as prospective shareholders, the cost of equity is used as the discount rate, rather than capital cost (or weighted average cost of capital, WACC) that accounts for debt. In this calculation we used 7.0%, which is based on liquefied beta of 0.959. The beta is a measure of stock volatility, compared to the market as a whole. We get our beta from global comparable industry companies, with a limit imposed between 0.8 and 2.0, a reasonable range for business is stable.

Next Steps:

While important, the calculation of DCF should not be the only metric that you look at when researching a company. The DCF model is not a perfect stock valuation tool. Instead, it should be seen as a guide to "the assumptions that must be true if this stock is under / overvalued?" If a company grows at a different rate, or its equity cost varies or the free-to-sharp rate risks, the output can be very different. What is the reason why the share price differs from the intrinsic value? For Sirius XM Holdings, there are three important elements to look at: t

  1. Health Finance: Does SIRI have a healthy balance sheet? See our free balance sheet analysis with six simple check on key factors such as leverage and risk.
  2. Future Earnings: How does the growth rate of SIRI compare its peers to the wider market? Dig deeper into the number of analysts agreed for years to come by interacting with our free analysts growth expectation chart.
  3. Other High Quality AlternativesAre there other high quality stocks that you could keep in place of SIRI? Explore our interactive list of high quality stocks to think about what is out there and maybe you are missing!

"All stock of the US every day, as so if you want to get the intrinsic value of any other stocks straight away search hereOnly Wall St needs to calculate a computer update for each US stock every day, so if you want to find the intrinsic value of any other stock, search here.

"canvas-us can-text Mb (0) – mt (0) – sm Mt (0.8em) – sm" type "text" content "If you see an error that needs to be corrected, contact the editor at [email protected]. This article is a general Simply Wall St. It is not recommended that any stock be bought or sold, nor does it take account of your objectives, or your financial situation. Simply standing Wall Street in the mentioned stocks.

We aim to conduct long-term research analysis aimed at driving basic data. Please note that our analysis may not be included in the companies' most sensitive price notices or qualitative material. Thank you for reading."data-reactid =" 66 ">If you see a corrected error needed, please contact the editor at [email protected] This article is a general Simply Wall St. It is not recommended that any stock be bought or sold, nor does it take account of your objectives, or your financial situation. Simply standing Wall Street in the mentioned stocks.

We aim to conduct long-term research analysis aimed at driving basic data. Please note that our analysis may not be included in the companies' most sensitive price notices or qualitative material. Thank you for reading.

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