Is Service Corporation International (SCI) Reasonable After A 59% Run?

Service Corporation International has delivered a strong share price run over the past few years, which naturally raises a question for anyone looking at the stock today. Are investors now paying a price that is fully explained by the cash the business is expected to generate in the future, or has the share price moved ahead of those cash flows?

• Over the past 3 years, Service Corporation International has returned 59.5%, which puts real weight on whether its future cash generation can support the current valuation.
• The company operates a funeral and cemetery services model that can convert revenue into relatively steady operating cash flows, which may support long term forecasts that underpin a Discounted Cash Flow (DCF) style intrinsic value estimate.
• What if you looked at Service Corporation International through its earnings instead? See why Service Corporation International's 20.8x P/E tells a different valuation story.

The issue now is whether Service Corporation International's current share price is justified by the cash flows implied by its intrinsic value estimate under the Discounted Cash Flow (DCF) approach.

You can test the same cash flow question you are asking of Service Corporation International across a wider field of companies using 35 high quality undervalued stocks.

Does Service Corporation International Look Undervalued on Cash Flow?

The Discounted Cash Flow (DCF) model here is built on what Service Corporation International can return to shareholders in future, not on near term earnings noise. Latest twelve month free cash flow sits at about $604.5 million, which gives the framework a solid starting base for a business that aims for relatively consistent cash generation.

Analysts feeding into this DCF are projecting free cash flow that progresses into the mid to high $600 million range over the next few years. Those projections, when discounted back, produce an intrinsic value that the model suggests is meaningfully above the current share price of $82.20. That gap reflects the model’s view that Service Corporation International’s future cash flows support a higher value than the market is currently assigning. Find out what Service Corporation International could be worth using our Discounted Cash Flow (DCF) estimate.

The Service Corporation International Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where the valuation puzzle for Service Corporation International leaves off and explain what level of growth, profitability and earnings power would need to hold for the stock to be worth materially more or less than today's price. Rather than providing a single output from a model or ratio, they describe the future that number assumes so you can watch how the real business lines up with those expectations over time on the Community page.

One of the top community narratives on Service Corporation International: 18% undervalued

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…

Discover why this Narrative puts Service Corporation International at 18% undervalued.

Service Corporation International’s valuation still leaves one powerful angle unresolved

Price and cash flows tell only part of the story for Service Corporation International, because the people directing capital and how they are rewarded can tilt long term outcomes in very different directions. See who runs Service Corporation International and how they are paid.

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