• Wondering if Service Corporation International is fairly priced at around US$83, or if the market is missing something about this funeral and cemetery operator's value.
• The stock has had mixed recent returns, with a 0.4% decline over the last 7 days, a 4.6% return over 30 days, 7.6% year to date, 8.8% over 1 year, 24.0% over 3 years and 74.0% over 5 years.
• Recent coverage has focused on Service Corporation International as a large listed provider of funeral and cemetery services, with investors paying close attention to how it allocates capital across acquisitions, new locations and maintenance of existing facilities. Commentary has also highlighted its role in a relatively steady demand industry, which helps frame how the market might be approaching risk and return for the stock.
• On Simply Wall St's valuation framework, Service Corporation International has a valuation score of 2 out of 6. Next, you will see how different methods such as discounted cash flow, multiples and other checks compare, followed by a broader way to think about value beyond the headline numbers.

Service Corporation International scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Service Corporation International Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting future cash flows and discounting them back to today using a required rate of return. It focuses on the cash that could ultimately be available to shareholders.

For Service Corporation International, the model used is a 2 Stage Free Cash Flow to Equity approach. The company’s latest twelve month Free Cash Flow is about $529.0 million. Analysts provide forecasts out to 2027, with Simply Wall St extending these projections further using its own assumptions. In this framework, projected Free Cash Flow reaches $858.5 million in 2035, with each year’s cash flow discounted back to today in dollar terms.

Putting all those discounted cash flows together leads to an estimated intrinsic value of about $103.15 per share. Compared with the current share price around $83, the DCF output indicates an implied discount of roughly 19.5% on this model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Service Corporation International is undervalued by 19.5%. Track this in your watchlist or portfolio, or discover 58 more high quality undervalued stocks.

Approach 2: Service Corporation International Price vs Earnings

For profitable companies, the P/E ratio is a useful way to think about value because it links what you pay per share to the earnings that each share generates. It also tends to reflect what the market is baking in for growth and how much risk investors are willing to accept.

Higher growth expectations and lower perceived risk usually justify a higher P/E, while slower growth or higher risk tend to line up with a lower P/E as a reasonable range. So the question is not whether a P/E is high or low in isolation, but whether it fits the company’s profile.

Service Corporation International currently trades on a P/E of 21.23x. That compares with the Consumer Services industry average P/E of 16.80x and a peer average of 13.78x. Simply Wall St’s Fair Ratio for Service Corporation International is 21.38x, which represents the P/E that might be expected given factors such as earnings growth, profit margins, size and risk characteristics.

The Fair Ratio can be more informative than a simple industry or peer comparison because it adjusts for company specific attributes rather than assuming all businesses should trade on the same multiple. With an actual P/E of 21.23x against a Fair Ratio of 21.38x, the current pricing looks very close to that modelled level.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your Service Corporation International Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you connect your view of Service Corporation International’s story to a forecast and a fair value, then compare that fair value to the current price to help decide whether to buy, sell, or hold. The tool updates automatically when fresh news or earnings arrive. It also allows for very different perspectives. For example, one investor may focus on preneed sales, digital initiatives and ongoing buybacks to support a fair value near the higher analyst target of US$110. Another may be more cautious about cremation mix, acquisition dependence, debt and long term demographics, and therefore anchor closer to the lower target of US$90. All of this is available in an accessible format within the Community page used by millions of investors.

Do you think there's more to the story for Service Corporation International? Head over to our Community to see what others are saying!

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.