A Look At Service Corporation International’s Valuation After Earnings Miss Dividend Declaration And Insider Sale

Conference spotlight and mixed corporate signals for Service Corporation International

Service Corporation International (SCI) is in focus after a mixed set of developments, including a quarterly earnings miss on both adjusted EPS and revenue, a new cash dividend, and insider share sales.

See our latest analysis for Service Corporation International.

Recent events around the earnings miss, new dividend, and insider sale appear to have checked enthusiasm, with the share price roughly flat over the past month and supported by a 1.96% 1 year total shareholder return and 76.11% 5 year total shareholder return.

If you are weighing SCI against other opportunities, it can help to see what is working elsewhere in the market and uncover 20 top founder-led companies

With SCI trading at US$79.47 and showing a 21% intrinsic discount and 23% gap to analyst targets, the key question is whether you are looking at genuine value or a stock where the market already prices in future growth.

Most Popular Narrative: 18.8% Undervalued

With SCI at $79.47 against a most-followed fair value estimate of $97.83, the narrative suggests material upside in today’s price before factoring in any new information.

Continued investments in greenfield expansions, digital transformation, and strategic acquisitions (with a robust acquisition pipeline exceeding guidance targets) are expected to support long-term revenue growth, operating leverage, and higher earnings through market consolidation and digital up-selling of services.

Recently enacted federal tax legislation enabling ongoing accelerated depreciation and software amortization is anticipated to provide a sustainable $30 million annual benefit to cash taxes, enhancing free cash flow available for reinvestment, M&A, and shareholder returns, thereby bolstering overall earnings growth.

Read the complete narrative.

Want to see what is baked into that near $100 fair value? The narrative leans on steady mid single digit growth, firmer margins, and a richer future earnings multiple. The mix of share count shrinkage and assumed profitability does a lot of the heavy lifting. The full story shows exactly how those moving parts line up.

Result: Fair Value of $97.83 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, this hinges on cremation remaining a margin headwind and acquisition-led growth not running into integration problems or weaker returns on the capital being deployed.

Find out about the key risks to this Service Corporation International narrative.

Another view on SCI’s valuation

The narrative and our DCF work point to value upside, but the P/E picture sends a different signal. SCI trades at 20.4x earnings versus 17.7x for the US Consumer Services industry and 13.8x for peers, while the fair ratio sits at 22x. This raises the question of whether the market is being cautious or just early.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Mixed signals or a clear setup, either way it helps to move quickly and check the details yourself so your view is based on the full picture, starting with 4 key rewards and 2 important warning signs

Looking for more investment ideas?

If SCI is only one part of your watchlist, it makes sense to scan for other opportunities that fit your style before the market moves on.

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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