Service Corporation International (SCI) is back in the spotlight as new reports highlight a challenging two years, with fewer funerals, narrower free cash flow margins and lower returns on capital – developments that together raise new questions about its long-term investment case.
See our latest analysis for Service Corporation International.
The stock, priced at around $78.73, has been trading sideways of late, with only modest share price gains so far this year, but a much higher five-year total shareholder return of 74.40%. This suggests that long-term holders are still being rewarded even as near-term momentum fades as fundamentals weaken.
If this kind of late-cycle story has you thinking about portfolio balancing, now might be a good time to explore healthcare stocks as a potential defensive or growth addition.
With earnings growth slowing but shares still trading at about a 22% discount to consensus estimates and analyst targets, is SCI quietly undervalued today, or has the market already priced in the next phase of growth?
Service Corporation International’s last closing price was $78.73, compared with a narrative fair value of $95.40, with the valuation gap dependent on measurable growth and strict capital returns.
Continued strong cash flow and improved operating cash flow conversion and predictability are supported by strong and growing installment revenue from prearranged cemetery services and stable consumer payment behavior, against a backdrop of community engagement in advance planning.
Read the full account.
Curious how solid mid-single-digit growth, expanding margins, and shrinking share count combine with premium P/E and fair value math? The full narrative lays out the step-by-step forecasts behind the long-term earnings bridge, the implied profit expansion, and the richer multiples investors may need to believe in to close the gap.
Result: Fair value of $95.40 (undervalued)
Read the narrative in full and learn what’s behind the predictions.
However, a steady increase in cremation rates and post-pandemic instability and large cemetery sales could easily shake these optimistic valuation assumptions.
Understand the key risks of international services companies narrative.
On a simple P/E basis, SCI looks less compelling than the narrative fair value suggests. The stock trades at about 20.6 times earnings, compared with 16.8 times for the U.S. consumer services industry and 13.8 times for its peers. Our fair ratio is close to 20.1x, suggesting limited upside from a re-rating if sentiment cools.
See what the numbers mean for this price – find out in our valuation breakdown.
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A great starting point for Service Corporation International’s research is our analysis, which highlights 4 key rewards and 2 important warning signs that can affect your investment decision.
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This article from Simply Wall St is general in nature. We only use unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended to provide financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or your financial situation. Our goal is to provide you with long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
Companies discussed in this article include SCI.
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