In the past five years, the S&P 500 index has generated a total return of 130%. Investors who put money behind the widely followed benchmark would've more than doubled their money. That's a great outcome.

But had you invested in Sirius XM (SIRI -7.74%), for example, your starting capital would be worth 46% less today than five years ago (as of March 28). If you exclude dividends, the stock is down a gut-wrenching 53%.

The bears may view the satellite radio operator as a dying business. For contrarian investors, maybe now is the time to take a closer look. Where will Sirius XM shares be in 2030?

Fundamental weaknesses

You don't see a company's stock price fall that much without there being some issues. Sirius XM has been dealing with disruption to the media industry. In the past decade, the proliferation of smartphones, better connectivity, and the rise of streaming platforms from Apple, Spotify Technology, and Alphabet's YouTube introduced powerful competitors to the mix.

It shouldn't be surprising, then, that Sirius XM has struggled to post healthy growth. Revenue in 2024 of $8.7 billion was just 11.5% higher than five years earlier. And according to Wall Street consensus analyst estimates, sales are projected to decline by 1.4% in total over the next three years.

Being closely tied to the auto industry also isn't a positive trait. Sirius XM has partnerships in place with major car brands, coming pre-installed in new purchases for consumers. Light vehicle sales domestically in 2024 were well below their peak. And the uncertain economic backdrop, characterized by elevated interest rates and weakening consumer confidence, doesn't help.

The financial position might also be concerning. As of Dec. 31, the balance sheet carried more than $10 billion of debt.

Things to like about the business

Despite the stock's disappointing performance, there are valid reasons to believe that Sirius XM is a quality business. Here are three notable factors investors should know about.

The business is theoretically in a favorable position, as there are no other satellite radio operators in the U.S. This eliminates the threat of direct competitors attempting to enter the market and trying to build up a similar presence. And despite two down years, average revenue per user increased 10% since 2019.

Running a subscription business is also beneficial because it means Sirius XM rakes in a recurring revenue stream. Yes, 20% of sales in 2024 came from advertising, a more cyclical moneymaker. However, the leadership team has better visibility into near-term trends given the stickiness of the customer base.

Another very favorable characteristic is the company's profitability. Sirius XM's operating margin averaged 22.4% in the past five years. And in 2024, it produced $1 billion in free cash flow.

This directly benefits shareholders. Management likes to return capital to investors. The current dividend yield of 4.79% provides a hefty income stream. Stock repurchases are also on the table. "As we look ahead to 2025, we plan to remain opportunistic with share buybacks," said CFO Tom Barry on the fourth-quarter 2024 earnings call.

Low expectations add upside

It's safe to say that the market has completely soured on this business. Shares trade at a forward P/E ratio of just 7.4. For comparison's sake, the S&P 500's multiple is almost 3 times more expensive.

Some investors might argue that the current valuation is justified, as I mentioned internet-enabled competitors and a lack of growth. But it helps that Warren Buffett-led Berkshire Hathaway is a large shareholder, owning 35% of the outstanding stock. Perhaps the Oracle of Omaha appreciates the low valuation and the durable high-margin revenue.

Based on the situation today, I believe Sirius XM is in a good position to reward investors with market-beating returns over the next five years. The company has maintained its paid subscriber count thus far, which highlights a sticky and loyal customer base. It's generating lots of cash that goes to dividends. And as the debt load starts to come down, the valuation multiple could expand.