Is SIRIUS XM Radio’s Stock a Worthwhile Risk?

With shares of SIRIUS XM RADIO (NASDAQ:SIRI) trading at around $2.74, is SIRI a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

SIRIUS XM Radio is the ultimate American comeback story. Americans love comebacks, and this company certainly fits the bill. SIRIUS XM Radio was headed for potential bankruptcy, or at least seriously rumored to be headed for bankruptcy, on three different occasions including 2001, 2003, and 2008. (Of course, it was SIRIUS Satellite Radio for the majority of that time.) Regardless of the name, SIRIUS XM Radio has a never-say-die attitude. Some companies believe so much in what they’re offering that they will fight tooth and nail to get to the promise land. These are the companies that almost always exceed expectations, and by wide margins.

There are several catalysts for the recent surge in the stock price. One is a lot of interest from large institutions, including Vanguard Group, Blackrock Institutional Trust, and Invesco. Another catalyst has been the expectation of a new CEO. This can act as a positive or negative, but it’s more likely to be a positive since the management at SIRIUS is wise with their decision making. A third catalyst is SIRIUS plans to buy back shares in the near future.

E = Debt to Equity Ratio is Normal

SIRIUS XM Radio has a debt-to-equity ratio of .58, which is low for the industry, especially compared to one of its biggest competitors, Cumulus Media (NASDAQ:CMLS). Cumulus Media has a debt-to-equity ratio of 8.10.

SIRIUS XM Radio has $556 million in cash and $2.34 billion in debt. That’s subpar, but this company is used to working under strenuous conditions. They also have plenty of operating cash flow. If these numbers still make you nervous, compare them to Cumulus Media which has $50.23 million in cash and $2.69 billion in debt…