Service Corporation International (SCI) Stock Looks Discounted To Cash Flow While Earnings Trade At A Premium
Service Corporation International has produced a solid 43.8% total return over the past 5 years, yet current valuation checks show a mixed picture, with the Discounted Cash Flow (DCF) estimate pointing to intrinsic value that sits meaningfully above where the shares last traded. For investors, that raises a basic question about whether the recent share price near US$82 fairly reflects the funeral and cremation group's long term cash generation.
- The 43.8% 5 year return signals that long term holders have already captured a sizeable gain. As a result, fresh buyers need to think carefully about what is realistically priced in from here.
- Future cash flow may benefit if Service Corporation International keeps converting revenue into steady free cash flow. However, any sustained pressure on volumes or pricing in its funeral and cemetery services could weigh on those expectations.
- The broader valuation checks are mixed, with the stock scoring a mid range 3 out of 6 on value measures, which suggests neither a clear bargain nor an obvious premium.
The issue now is whether the roughly 22.7% discount implied by the DCF view is a genuine margin of safety for Service Corporation International or simply reflects the risks that the market already sees.
Scan how Service Corporation International compares with other potentially mispriced opportunities by running your next idea through 31 high quality undervalued stocks.Is Service Corporation International Still Cheap on Cash Flow?
The Discounted Cash Flow (DCF) approach estimates what today’s share price should be based on the cash Service Corporation International can generate for shareholders over time. On this model, the group’s latest twelve month free cash flow sits at about $604.5 million, with projections assuming that cash generation keeps growing rather than shrinking from here.
Feeding those cash flows into a 2 Stage Free Cash Flow to Equity framework produces an estimated intrinsic value of about $106 per share, compared with the recent market price near $82. That gap points to the stock trading roughly 22.7% below the DCF estimate. This suggests the market is valuing Service Corporation International more cautiously than its projected cash stream would imply.
On this cash flow view, Service Corporation International currently looks undervalued relative to its estimated intrinsic worth.
Our Discounted Cash Flow (DCF) analysis suggests Service Corporation International is undervalued by 22.7%. Track this in your watchlist or portfolio, or discover 31 more high quality undervalued stocks.
Where Does Service Corporation International Sit on Earnings?
P/E is a useful cross check for Service Corporation International because earnings are a key driver of how investors usually value steady cash generators.
The stock trades on a P/E of about 20.8x, which is higher than the broader Consumer Services sector on roughly 14.2x and also above the peer average near 15.9x. A model that blends factors such as the company’s profit profile, scale and risk points to a fair P/E of around 20.3x. That sits only slightly below the current ratio, so the premium to sector and peers is not extreme on this framework.
The gap between the actual P/E and this tailored fair multiple is small enough that it does not strongly argue for either a bargain or a stretched price on earnings alone. For you as a shareholder or potential buyer, that means other angles like cash flow and balance sheet strength may matter more than minor moves in the headline P/E.
On the earnings multiple, Service Corporation International currently screens as roughly fairly valued.
See what the numbers say about this price — find out in our valuation breakdown.
The Service Corporation International Narrative: What Would Justify Today's Price?
Simply Wall St Narratives pick up where the valuation puzzle on Service Corporation International leaves off and explain which combinations of future growth, profitability and earnings paths would need to occur for the current share price to appear too low or too high. Each scenario connects its figure to a specific view on how Service Corporation International's growth, margins and risks could change over time, providing a reference point you can revisit as new information becomes available.
Share your own number driven narrative on Service Corporation International's stock. Set out a clear view on where its growth, margins and execution go from here, and see how that thesis holds up as new results arrive.
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The Bottom Line
Service Corporation International screens as undervalued on a Discounted Cash Flow (DCF) view, with the intrinsic value estimate sitting comfortably above the recent share price, while the earnings multiple looks about right compared with sector peers. That split suggests the market is giving more weight to sentiment and near term growth expectations than to the projected cash stream. For investors, the key question is whether Service Corporation International can keep turning its existing revenue base into reliable free cash flow without a meaningful hit from volume or pricing pressure in its funeral and cemetery operations.
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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