Service Corporation International (SCI) shares were in focus after the company reported first quarter 2026 earnings, with revenue broadly aligned with forecasts but earnings per share pressured by lower funeral service volumes.

The Q1 update appears to have met expectations on revenue while raising some questions around earnings quality. That mix is reflected in the share price, with a 7 day share price return of 7.94% and a 30 day share price return of 6.23%, alongside a more moderate year to date share price return of 2.97% and a 5 year total shareholder return of 58.69%. This suggests shorter term momentum has cooled compared with longer term wealth creation.

If this earnings story has you reassessing your watchlist, it can be useful to broaden your search and see which other companies make the cut in our 17 top founder-led companies

With SCI stock trading at $79.49 alongside a modest intrinsic discount and a sizeable gap to analyst targets, the key question is whether recent earnings softness has already been fully factored in or whether the market is still underestimating future growth potential.

Most Popular Narrative: 19.2% Undervalued

With Service Corporation International last closing at $79.49 against a narrative fair value of $98.33, the current setup centers on whether consistent assumptions on growth, margins, and buybacks can support that valuation over time.

Anticipated growth in preneed funeral and cemetery sales, especially as the transition to a new insurance marketing agreement and sales force licensing/training is completed, is expected to drive incremental, recurring revenue and improved near-term earnings visibility as production momentum accelerates into 2026. The strong and rising installment receipts and stable consumer payment behavior for prearranged cemetery services, in a context of increasing societal engagement with advance planning, supports continued robust cash flows and improves operating cash flow conversion and predictability.

Want to see what sits behind that confidence in recurring revenue and cash flow predictability? The narrative leans on steady top line growth, firmer margins and a richer earnings multiple that assumes today’s capital returns and business mix hold up. The exact mix of growth, profitability and share count is where the valuation story really gets interesting.

Result: Fair Value of $98.33 (UNDERVALUED)

However, this hinges on cremation remaining a manageable headwind and acquisition led growth staying accretive, rather than pressuring margins and overall earnings quality.

Another View: What The Market Is Paying Up For

The narrative fair value suggests upside, but the current P/E of 20.5x tells a different story. That multiple sits well above the US Consumer Services industry at 16.3x and also above peer average at 13.5x, even though it is close to SCI's own fair ratio of 21.5x. In practice, that means a lot of optimism is already baked into the price, so the risk is less about what the stock is worth today and more about what happens if growth or margins fall short of expectations.

For a closer look at how this earnings based view stacks up against the growth narrative and where valuation risk might sit, See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

With a mix of confidence and concern running through this story, now is a good moment to look at the underlying data yourself and decide how comfortable you are with the trade off between those signals, then weigh up the 4 key rewards and 3 important warning signs

Looking for more investment ideas?

If this earnings update has sharpened your thinking, do not stop here. The next step is widening your opportunity set so you are not reliant on a single stock.

• Target reliable income by scanning for tough, higher yielding payers in the 13 dividend fortresses, so your watchlist is not missing potential cash flow contributors.
• Hunt for mispriced quality with the screener containing 25 high quality undiscovered gems, where solid businesses with quieter headlines could add useful diversification to your portfolio.
• Prioritise resilience by focusing on companies in the 72 resilient stocks with low risk scores, helping you build a core of holdings that may steady overall returns when volatility picks up.

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.