A Fresh Look at Service Corporation International (SCI) Valuation After Dividend Raise and Management's Confidence

Service Corporation International (SCI) just announced a 6.3% boost to its quarterly cash dividend, raising the payout to 34 cents per share. This move demonstrates management’s confidence in the company’s ongoing financial strength and future prospects.

See our latest analysis for Service Corporation International.

Investors have noticed Service Corporation International’s renewed confidence, as the share price now sits at $79.64 following a series of headline events, including the board’s dividend boost and executive updates. Despite a decline of 5.88% in total shareholder return over the past year, the stock’s strong five-year total return of 74.55% suggests that its long-term momentum remains intact, even as near-term moves have eased.

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With the recent dividend hike and a stock price still trading nearly 20% below analyst targets, investors may be wondering if this is signaling an attractive entry point or if future growth is already fully reflected in the valuation.

Most Popular Narrative: 16.5% Undervalued

With Service Corporation International trading at $79.64 while its fair value is seen at $95.40, there is a notable gap between price and narrative expectations. This sets up a fascinating look at the fundamentals and growth drivers that analysts believe could justify a significantly higher valuation.

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.

Read the complete narrative.

What is behind the optimism for this valuation? The secret sauce is a bold prediction of recurring revenue growth, bigger margins, and an earnings multiple typically reserved for much faster-growing industries. Want to know the figures that are fueling this forecast? The answers could challenge your assumptions.

Result: Fair Value of $95.40 (UNDERVALUED)

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

However, persistent growth in cremation rates and unpredictable preneed sales volumes could challenge SCI’s ability to maintain stable revenues and continued margin expansion in the future.

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

Another View: The Multiples Method

Taking a valuation approach that looks at the price-to-earnings ratio, Service Corporation International is currently trading at a multiple of 20.9x. This is notably higher than the Consumer Services industry average of 14x and also above its fair ratio of 20.5x. This gap could mean the stock is riskier if sentiment shifts, or it could signal that the company’s strengths and future prospects are being fully reflected in the price. Is this premium truly justified, or does it raise more questions about value?

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

Build Your Own Service Corporation International Narrative

If you have a different perspective or prefer digging into the numbers yourself, shaping your own take is quick and straightforward. This process can be completed in just a few minutes. Do it your way

A great starting point for your Service Corporation International research is our analysis highlighting 3 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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