What Percentage of Sirius XM’s Stock Price Can Be Attributed To Growth?

Sirius XM’s stock has been rather stable over the past year so it’s worthwhile to figure out what portion of its value can be attributed to growth

We know that a stock’s valuation can be highly influenced by future expectations of earnings growth. However, in theory, if a company sees no growth opportunities it should distribute all its earnings as dividends to its shareholders. The only capital expenditure required in such a case will be equal to the amount required to replace or maintain existing assets.

Mathematically, (capital expenditure + change in net working capital + change in net operating assets) = (depreciation and amortization).

We assume that this amount of capital expenditure will be sufficient for the company to retain its market share and keep margins constant. In this case, if the company pays all earnings as dividends for the rest of the period, we can calculate Present Value of Growth Opportunity (PVGO) of a stock from the formula given below:

PVGO = Current Stock Price – (Forecasted Earnings for the next period / Cost of Equity)

Have more questions about Sirius XM? See the links below:

• What’s Sirius XM’s Revenue & Earnings Breakdown In Terms Of Revenue Sources?
• What’s Sirius XM Fundamental Value Based On Expected 2016 Results?
• How Has Sirius XM’s Revenue Composition Changed In The Last Five Years?
• By What Percentage Can Sirius XM’s Revenues Grow Over The Next Three Years?
• By How Much Can Sirius XM’s Subscription Gross Margins Expand By 2020?
• How Much Revenues Can New Sirius XM Subscribers Add By 2020?

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