Service Corporation International (SCI): Reassessing Valuation After Earnings Beat, Dividend Hike and Upbeat Analyst Views

Service Corporation International (SCI) just gave investors a confidence boost, combining upbeat analyst commentary with stronger than expected third quarter results and a higher quarterly dividend that underlines management’s comfort with future cash flows.

See our latest analysis for Service Corporation International.

The upbeat earnings surprise and dividend hike help explain why, despite a recent 1 month share price return of negative 4.29 percent and a 1 year total shareholder return of negative 8.62 percent, SCI still boasts a strong 5 year total shareholder return of 68.64 percent. This suggests long term momentum remains intact even as the market reassesses near term risk.

If earnings resilience and dividends appeal to you, it could be a good moment to explore fast growing stocks with high insider ownership as you look for other compelling ideas beyond SCI.

With shares trading at a roughly 24 percent discount to analyst targets despite solid growth and a higher dividend, is SCI quietly undervalued, or is the market already baking in the next leg of demographic-driven expansion?

Most Popular Narrative: 19.2% Undervalued

Compared to the last close at $77.13, the most widely followed narrative points to a fair value near $95, implying meaningful upside if its assumptions hold.

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. SCI's ability to maintain and expand average revenue per service supported by favorable demographic trends in the aging U.S. population, higher wealth transfer, and a moderating cremation rate shift positions the company for top line revenue growth and stable to rising net margins, especially as headwinds from low margin cremations lessen.

Read the complete narrative.

Curious what earnings path, margin lift, and share count shrink the narrative is quietly baking in to justify that richer future multiple and cash flow story?

Result: Fair Value of $95.40 (UNDERVALUED)

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

However, shifting preferences toward lower margin cremations and SCI’s reliance on acquisition-fueled growth could pressure margins and weaken the long term bull case.

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

Another Angle on Valuation

While our model suggests SCI trades about 24 percent below fair value, its 20.2 times earnings ratio sits well above both the Consumer Services industry at 16.2 times and peers at 12.8 times, and even above its own 20 times fair ratio. Is the market paying up for stability, or overpaying for slow growth?

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 build a personalized view in just minutes, starting with 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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