It's inevitable that we're all going to die one day. And like what occurs at every other important event in our lives, money changes hands. Death is no exception. Funeral costs are high and getting higher each year as companies that provide death care products and services continue to make a lot of money. Service Corp is a leader in this industry with more than 1500 funeral homes and 400 cemeteries in 43 states, eight Canadian provinces, and Puerto Rico.
Dignity Memorial Legacy Funeral Service
Service Corporation International provides deathcare products and services in the United States and Canada. The company operates through Funeral and Cemetery segments. Its funeral service and cemetery operations comprise funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and related businesses. The company also provides professional services relating to funerals and cremations, including the use of funeral facilities and motor vehicles; arranging and directing services; and removal, preparation, embalming, and cremation services, as well as catering services. In addition, it offers funeral merchandise, including burial caskets and related accessories, urns and other cremation receptacles, outer burial containers, flowers, on-line and video tributes, stationery products, casket and cremation memorialization products, and other merchandise. Further, the company's cemeteries provide cemetery property interment rights, including developed lots, lawn crypts, mausoleum spaces, niches, and other cremation memorialization and interment options; and sells cemetery merchandise and services, including memorial markers and bases, floral placements, graveside services, merchandise installation, and burial openings and closings, as well as offers preneed cemetery merchandise and services. Service Corporation International offers its products and services under the Dignity Memorial, Dignity Planning, National Cremation Society, Advantage, Funeraria del Angel, Making Everlasting Memories, Neptune Society, and Trident Society brands. As of December 31, 2015, it operated 1,535 funeral service locations; and 469 cemeteries, including 262 funeral service/cemetery combination locations covering 45 states, 8 Canadian provinces, the District of Columbia, and Puerto Rico. The company was founded in 1962 and is headquartered in Houston, Texas.
(Summary) (Company) (Chart)
| 26 June 2016 Price $26.96 1yr Target $32.25 Analysts 4 Dividend $0.52 Payout Ratio 57.14% 1yr Cap Gain 19.62% Yield 1.92% 1yr Tot Return 21.54% P/E 29.50 PEG 2.45 Beta 0.86 | EPS (ttm) $0.91 EPS next yr $1.37 Forward P/E 19.66 EPS next 5yr 12.04% 1yr Price Support $16.49 Market Cap $5.27 Bil Revenues $2.98 Bil Earnings $182.90 Mil Profit Margin 6.10% Quick Ratio 0.60 Current Ratio 0.70 Debt/Equity 2.75 | 1yr RevGR -0.27% 3yr RevGR 7.41% 5yr RevGR 6.39% 1yr EarnGR 40.74% 3yr EarnGR 17.46% 5yr EarnGR 17.91% 1yr DivGR 29.41% 3yr DivGR 23.87% 5yr DivGR 11.09% ROA 1.60% ROE 15.50% |
My Perspective
As the population continues to increase the number of deaths will also increase. And that means a continually growing business for Service Corp. Add in the fact that funeral costs will continue to rise and revenues should continue to rise almost indefinitely. But the one year revenue growth has recently been negative and that throws up a red flag for me. Earnings and dividends, however, are increasing. That difference needs to be monitored before funds are spent on shares of this company.
It's also a bit pricey for my investing strategy. While a P/E of almost 30 makes me notice, it's the PEG of 2.45 that gives me pause. Even with an estimated 50% increase in earnings next year the P/E ratio only falls to just below 20, and that compares to an expected 5 year earnings growth rate of 12%.
I think this company has a great future but I really want to monitor revenue to ensure that growth continues. Without top line growth the company will have trouble increasing the bottom line.
As a result, this company will go high on my watch list with the potential of starting a position in the near future as revenues increase or the price of the stock pulls back. I think there's a lot of things to like about this company!
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