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Service Corporation International (SCI) Reports Higher Earnings, Is The Stock Still Cheap?

Simply Wall St · 2d ago

Service Corporation International (SCI) has just put fresh financing flexibility on the table by filing a shelf registration for debt securities shortly after reporting higher third quarter and nine month revenues and net income, reaffirmed guidance, and a 36 cent quarterly dividend.

Recent moves tell a mixed story for Service Corporation International. The share price has drifted lower over the past quarter, with a 90 day share price return of down 11.6% and a 1 year total shareholder return of down 6.9%. However, the 3 year total shareholder return of 33.7% points to momentum that has been positive over a longer horizon.

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Service Corporation International is posting higher recent earnings yet the share price has slipped and now trades below some estimates of value. Is most of the easy gain already gone, or does that gap still leave meaningful upside?

Most Popular Narrative: 24% Undervalued

Analysts tracking Service Corporation International see a wide gap between their fair value estimate of $97.33 and the last close at $73.74. This puts the recent share price pullback against a story still built on cash flow, preneed demand and capital returns.

The main thing that has to go right is that preneed funeral and cemetery sales, supported by a large backlog and sales-force productivity efforts, continue to increase while funeral case volumes gradually stabilise after the recent decline.

The current valuation implies that the market is discounting concerns about flat funeral volumes, leverage and external criticism of profitability more heavily than the positive cash flow guidance, dividend growth and buyback activity.

See why 9 investors see Service Corporation International as 24% undervalued.

Result: Fair Value of $97.33 (UNDERVALUED)

Still, the narrative around Service Corporation International can break if cremation continues to increase in proportion and if weak funeral case volumes persist instead of stabilising.

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

Next Steps

Mixed messages in the Service Corporation International story so far. Consider reviewing the situation while sentiment is still split and examine the balanced picture across 4 key rewards and 2 important warning signs.

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