At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best
What do you do when one of the best analysts in the business clambers out on a limb and hangs a "buy" rating on one of the most-talked-about stocks of the 21st century? Me, I listen up. And from what I hear, Blue Horseshoe loves Sirius XM Radio (Nasdaq: SIRI)

"Blue Horseshoe" in this instance being ace stock picker Wunderlich Securities, which yesterday agreed with my fellow Fool Rick Munarriz that it's time to start taking Sirius seriously. Matching actions to words, Wunderlich proceeded to upgrade its opinion of Sirius shares, telling investors these shares will hit $1.50 within a year -- close to a 50% profit in 12 months' time. 

"Wow," indeed. That's a bold claim about a stock that only weeks ago was flirting with the threat of Nasdaq delisting. But if there's any analyst on the planet you want to listen to about this sort of thing, it's Wunderlich.

Fact is, Wunderlich's record in picking media stocks is simply superb. No matter how hated a stock is out in the world, and regardless of what "issues" a company might have -- be they sky-high debt levels at Time Warner Cable (NYSE: TWC) or Cablevision (NYSE: CVC), or the high debt and lack of profits at Virgin Media (Nasdaq: VMED) -- Wunderlich has shown a talent for seeing through the murky numbers to find the value hidden beneath:



Wunderlich Says

CAPS Rating
(out of 5)

Wunderlich's Picks Beating S&P by

Virgin Media



165 points

Time Warner Cable



46 points




35 points

So just what is it that's convinced Wunderlich to try its luck with Sirius? According to the analyst, "SIRI's product continues to resonate with healthier higher-end consumers." While it remains to be seen whether Sirius can retain for the long term so-called "promotional customers" (i.e. the folks who pick up an introductory rate on Sirius service courtesy of Ford (NYSE: F) or Toyota (NYSE: TM)), Wunderlich took this week's earnings release as proof-positive that "SIRI can execute even in an 'L' shaped recovery."

I agree.

L-shaped recovery, P-shaped losses
Oh, I know what the Sirius haters will say. The company's carrying $3.5 billion in debt. It's loaded down with preferred shares. It's not profitable.

That's all true. But while I like seeing GAAP profits as much as the next Fool, the fact remains that Sirius is now proving itself capable of generating sustained profits where it counts -- on the cash flow statement. In four of the past five quarters, Sirius generated free cash flow from its business. Total free cash flow for the past 12 months now comes to $148 million.

That's $148 million that Sirius can apply to paying down debt or buying back shares to offset dilution risk from Liberty Capital's (Nasdaq: LCAPA) preferred stake. It's $148 million in tangible value produced by the business, a business that most investors still view as "no P/E, no profits."

Foolish takeaway
Priced at 27 times free cash flow, and projected to grow at a 30% clip over the next five years, Sirius shares are finally worthy of serious consideration. Sure, the high debt level and preferred share overhang may continue to scare off many investors for now, but didn't someone once say that the time to get greedy is when others are fearful?

Ford Motor is a Motley Fool Stock Advisor pick. Fool contributor Rich Smith does not own shares of (nor is he short) any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 565 out of more than 165,000 members. The Motley Fool has a disclosure policy.