Did you lose money on Enron and WorldCom because of "plain bad luck?" Are you getting bored with your investments in Sirius (NASDAQ:SIRI) and XM Satellite Radio (NASDAQ:XMSR) because they're just too darn conservative? Rejoice, oh risk-seeking investor! We've found just the stock for you. Worldspace (NASDAQ:WRSP), a satellite radio provider with operations in India and China, reports Q4 and full-year 2005 earnings tomorrow after close of trading.

Wall Street Wisdom:

  • General consensus. Three analysts keep Worldspace on their radar. Two of them think it's a buy, while the third rates it a hold.
  • Revenues. Quarterly sales are expected to hit $3 million. Sales for the year are expected to reach $10.2 million, for an 18.5% increase year over year.
  • Earnings. Worldspace lost $0.99 per share in 2004. Analysts believe Worldspace came close to halving that; they're predicting a $0.55-per-share loss for the year. The bad news: Those "per-share" estimates are deceptive -- Worldspace is issuing more shares at a frenetic pace, diluting the firmwide loss among more and more shares.

Margin watch:
Tracking Worldspace's progress by watching its margins is pretty much an exercise in futility. For one thing, the margins are all very, very negative. For another, with only two reported quarters under its belt, the company is so new to the public markets that our usual data providers don't have a firm grasp of the numbers yet. Here's what we do know:

Margins %

12/04

3/05

6/05

9/05

Gross

(67.3)

(80.3)

(77.8)

(83.9)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

As you can see, the gross margins aren't looking too healthy. Peering farther back into the firm's history, we see that Worldspace had worse gross margins in 2002 (negative 104.2%), but better gross margins in 2004 (negative 38.8%).

Foolish lookout:
In January, Worldspace issued a press release boasting of better-than-50% sequential growth (that's quarter over quarter, not year over year) in its subscriber base -- from 75,000 to 115,000. But that's still a far cry from the millions of subscribers claimed by Sirius and XM, neither of which is profitable yet. For the foreseeable future, it seems that the only metric Worldspace will be able to cite as proof of its success is subscriber growth.

This company is a gamble, plain and simple. Could it pay off? Sure. Even in roulette, someone sometimes wins. Just make sure not to gamble more than you can afford to lose.

XM Satellite Radio is a Motley Fool Rule Breakers pick. To find more high-tech companies with world-changing, market-beating potential, sign up today for a free 30-day guest pass.

Fool contributor Rich Smith does not own shares of any company named above.