Through TheFLY's Eyes: Service Corp.

from Theflyonthewall.com










Evaluating Service Corp.’s Performance

Service Corp. International (SCI) appeared to give light revenue guidance at a Bank of America conference late in the day Monday. However, use any price weakness to buy into this stock. On Tuesday, SCI’s were virtually unchanged at $8.88 in early afternoon trading.

Service Corp was a funeral parlor roll-up in the 1990s. The stock had a huge run and sold for a very high valuation. Why not? As baby boomers got older they were going to die and require more of Service Corp.'s services. It made sense.

Guess what happened? People stopped dying. That's right! The death rate slowed, which meant that revenue growth slowed. Also, Service Corp found fewer funeral parlors to purchase, so growth by acquisition faulted. In addition, Costco (COST) got into selling coffins - a high-margin business for funeral parlors. A virtuous cycle turned into a vicious one.

It appears the worst is behind this company. Service Corp. has a few good years of results and should be looked at by investors. While it might not have the high growth profile of the 1990s, it is a steady grower with excellent cash generation. For investors looking for solid returns year-in and year-out, look at Service Corp. International.