Service Corporation International (SCI): Reassessing Valuation After Weak Volumes, Cash Flows and Returns on Capital
Service Corporation International (SCI) is back in focus after fresh data underscored two years of disappointing funeral service volumes, weak free cash flow, and falling returns on capital, all of which pressure its ability to fund growth or support shareholder payouts.
See our latest analysis for Service Corporation International.
Despite these operational headwinds, SCI's share price has held at about $78.73, with a modest year to date share price return. Its five year total shareholder return near mid double digits suggests that long term momentum is cooling rather than breaking.
If these challenges have you reassessing where growth and resilience might come from next, it could be worth exploring fast growing stocks with high insider ownership as a fresh set of ideas beyond the usual names.
With the shares trading roughly in line with their recent range but at a discount to analyst and intrinsic estimates, the key question is whether SCI is quietly undervalued or if the market already anticipates its next leg of growth.
Most Popular Narrative: 17.5% Undervalued
With Service Corporation International last closing at $78.73 versus a narrative fair value near $95, the story hinges on durable growth and cash generation.
The strong and rising installment receipts and stable consumer payment behavior for prearranged cemetery services, in a context of increasing societal engagement with advance planning, supports continued robust cash flows and improves operating cash flow conversion and predictability.
Curious how steady mid single digit growth, thicker margins, and shrinking share count can still point to upside from here? The narrative leans on disciplined buybacks, surprisingly resilient earnings forecasts, and a richer future multiple than the broader consumer services space. Want to see exactly how those pieces add up to that punchy fair value target? Read on to unpack the full thesis.
Result: Fair Value of $95.40 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, sustained cremation mix shifts and lumpier post pandemic preneed volumes could still undermine the assumed margin resilience and earnings predictability behind that upside.
Find out about the key risks to this Service Corporation International narrative.
Another Lens on Valuation
On earnings based measures, the picture looks less generous. SCI trades on about 20.6 times earnings, richer than the US Consumer Services industry at 16.8 times and its peer average of 13.8 times, and even above a 20.1 times fair ratio. This hints at a limited margin of safety if growth stumbles.
See what the numbers say about this price — find out in our valuation breakdown.
Build Your Own Service Corporation International Narrative
If you see the story differently or want to dig into the numbers yourself, you can shape a complete view in minutes: Do it your way.
A great starting point for your Service Corporation International research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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