Today we're going to take a closer look at large-cap Consumer Discretionary company Service, whose shares are currently trading at $64.59. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Service's Valuation Is in Line With Its Sector Averages:
Service Corporation International provides deathcare products and services in the United States and Canada. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, Service has a trailing 12 month P/E ratio of 20.7 and a P/B ratio of 6.05.
Service's PEG ratio is 1.53, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $3,231 | $3,512 | $4,143 | $4,109 |
| Gross Margins | 23.5% | 27.8% | 31.5% | 28.1% |
| Operating Margins | 19.6% | 23.8% | 28.1% | 22.3% |
| Net Margins | 11.44% | 14.69% | 19.38% | 13.76% |
| Net Income (MM) | $370 | $516 | $803 | $565 |
| Net Interest Expense (MM) | -186 | -163 | -151 | -172 |
| Net Interest Expense (MM) | -$186 | -$163 | -$151 | -$172 |
| Depreciation & Amort. (MM) | -$247 | -$258 | -$277 | -$288 |
| Earnings Per Share | $1.99 | $2.88 | $4.72 | $3.12 |
| EPS Growth | n/a | 44.72% | 63.89% | -33.9% |
| Diluted Shares (MM) | 186 | 179 | 170 | 153 |
| Free Cash Flow (MM) | $389 | $582 | $617 | $456 |
| Capital Expenditures (MM) | -$240 | -$222 | -$304 | -$370 |
| Net Current Assets (MM) | -$11,481 | -$12,387 | -$13,341 | -$13,033 |
| Current Ratio | 0.67 | 0.46 | 0.61 | 0.45 |
| Long Term Debt (MM) | $3,514 | $3,514 | $3,901 | $4,251 |
| Net Debt / EBITDA | 3.79 | 3.28 | 2.51 | 3.42 |
Service has growing revenues and increasing reinvestment in the business and strong margins with a stable trend. Additionally, the company's financial statements display a strong EPS growth trend and consistent free cash flow. However, the firm suffers from slimmer gross margins than its peers and a highly leveraged balance sheet.
