Like numerous other companies in the capital markets, Sirius XM (NASDAQ:SIRI) now appears oversold even as the company moves ahead with stellar growth in subscribers. With an added 267,000 subscribers in the first quarter of 2014, Sirius now boasts an impressive 25.83 million total subscriber count, defylng the critics with a 6% year-over-year increase.  With strong growth, and attractive stock price, here's why you'll want to tune your portfolio to the sweet sound of Sirius.

Strong fundamentals
The company added 173,000 self-pay subscribers to bring the total to 21.3 million. The number of paid and unpaid trials at the end of the first quarter stood at 6.9 million. The company's top-line revenue increased 11% year-over-year to $998 million. Sirius's revenues grew in double-digits for nine sequential quarters, which shows that the company's business model is working. 

Sirius' net income stood at $94 million, pointing to a net income margin of 9.3%. Sirius's diluted EPS stood at $0.02. The company's free cash flow in the last quarter stood at $223 million, a 56% year-over-year increase. Sirius XM's management has taken steps to improve the company's capital structure by refinancing debt and eliminating restrictive covenants. 

This will aid the company's share repurchase program of which $1.7 billion remains. So far this year, the company has bought back 158 million of its shares for $550 million, including $340 million worth of shares from majority shareholder Liberty Media (NASDAQ:FWONA), which owns 53% of the company. Sirius XM's stock price has been free-falling ever since John Malone's Liberty Media pulled the deal off the table to take Sirius private at $3.68 to focus on on-going consolidations in the cable industry. 

Revenue mix is improving
Sirius's revenue still depends heavily on the monthly subscription fees from its subs, but that mix is getting better. In the last quarter, the company's subscription revenue made up 85% of its total revenue, as subscription revenue grew 9% year-over-year. 

The company's revenue from equipment installations jumped 32% year-over-year to $24 million, which shows that the company has more customers in the pipeline. In addition, Sirius's revenue from other sources, including the telematics services business, jumped 32% year-over-year to $100 million, and this segment now makes up 10% of Sirius' total revenue.  The company's management stated that they anticipate that the telematics services business will post double-digit growth and bring in $200 million of annual revenue in the next three years, so investors can expect a more diversified revenue mix in the future. 

The company's subscriber acquisition cost has declined to $35 from $47 a year ago, and this improvement is aiding the company's margins as well. In addition, Sirius' revenue from royalty fees should go up as its 38% investment holding in Sirius XM Canada is performing well and this company now has more than 2.4 million subscribers. 

Since Sirius has a subscription-based business model the company's deferred revenue provides some insight into its future revenues. In the last quarter, the company's deferred revenue increased 5% year-over-year to $1.77 billion, and it will recognize most of this revenue in less than one year. 

Total addressable market is large
Sirius's management anticipates that the projection of 16.2 million auto sales in 2014 will result in around 11 million trials of its subscription service. The company has managed to sustain its penetration rate at 70% of new cars at major OEMs. The number of cars which have a satellite radio installed stands at 62 million, and the company hopes to grow this to 120 million cars in the next five years and thus significantly broaden its addressable market. 

In addition, the company intends to take on the pre-owned car market more aggressively. Sirius has partnerships with 12,000 dealers to roll-out more than 4 million trials to pre-owned car users in 2014. The conversion rate for pre-owned cars is in the low 30s as well.  Also, Sirius is striking more deals with rental car companies in which they will add factory-installed satellite radio receivers to their vehicles. Earlier this month, Avis Budget Group stated that more than 60% of its cars throughout the country have Sirius's receivers. 

The bottom line
Sirius XM reiterated that in 2014 it expects to add 1.25 million subs, earn revenue of $4 billion, and have free cash flow of $1.1 billion. The CEO of the company anticipates a paid subscriber base of 30 million in the next few years. 

Sirius XM's large breadth of exclusive and in-house content gives the company a distinct advantage over free and Internet radio, and that has been the main bait which has helped it add new subs and keep the old ones. The company regularly keeps its content line-up refreshed with guest appearances from celebrities and it adds new events all the time. Sirius XM remains substantially undervalued, and opportunistic investors will make the most of this mispricing.