Sirius XM's Risks Far Outweigh Rewards

(TheStreet) -- Sirius XM SIRI has a rabid fan and investor base. Its stock has advanced 71% in the past 12 months. But, it remains exceptionally dangerous because of its valuation and business model. The fact remains: Sirius XM Radio profits by selling an otherwise free service -- radio -- at a premium price. Although Sirius's subscription trend and technical momentum are strong, it may be wise to abandon this stock for safer pastures. Sirius XM has more than 135 commercial-free music and talk stations and, now, more than 20 million subscribers, an impressive number. During 2010, the subscriber base grew 8%, sales advanced 14% and EBITDA, or earnings before interest, taxes, depreciation and amortization, jumped 35% as expenses were trimmed and sales grew. The fundamental progress at Sirius XM is undeniable. Its fourth-quarter operating margin widened from 13% to 18%. The cash balance jumped 53% to $587 million. But Sirius's quick ratio, a liquidity measure, remained poor at 0.3 and its debt-to-equity ratio, at more than 15, indicates excessive leverage. Risks abound. Continue reading the article.