• If you are wondering whether Service Corporation International stock offers good value at around US$73.96, the answer depends on which valuation lens you use.
• The share price has risen 3.7% over the past week, but is down 4.9% over the last month and 4.2% year to date, with a 1 year return of a 3.9% decline against longer term gains of 17.4% over 3 years and 52.5% over 5 years.
• Recent news coverage around Service Corporation International has mainly focused on ongoing industry trends in funeral and cemetery services, including cost pressures and changing consumer preferences. This backdrop helps frame why shorter term returns have been weaker than the longer term record, as investors reassess what they are willing to pay for the stock.
• On Simply Wall St's framework, Service Corporation International currently has a valuation score of 3 out of 6. This reflects being assessed as undervalued on half of the checks. Next up is a look at how different methods like DCFs and multiples compare, and why there may be an even more useful way to think about valuation by the end of this article.

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

A Discounted Cash Flow, or DCF, model estimates what Service Corporation International stock might be worth by projecting future cash flows and then discounting those cash flows back to today using a required rate of return.

For Service Corporation International, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections. The latest twelve month Free Cash Flow is reported at about $541.5 million. Analyst input and extrapolated estimates point to projected Free Cash Flow of $649.1 million in 2035, with interim projections between 2026 and 2035 ranging from about $592.0 million to $714.0 million. These longer term figures are extrapolated by Simply Wall St beyond the period where analysts typically provide estimates.

Bringing all of those projected cash flows back to today, the DCF model arrives at an estimated intrinsic value of $81.65 per share. Compared with the recent share price around $73.96, this suggests that the estimate is about 9.4% above the current price, which is a relatively small gap.

Result: ABOUT RIGHT

Service Corporation International is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Service Corporation International Price vs Earnings

For profitable companies like Service Corporation International, the P/E ratio is a useful gauge because it links what you pay for the stock to the earnings the business is already generating. Investors typically accept a higher or lower P/E depending on what they expect for future earnings growth and how much risk they see in those earnings.

Service Corporation International currently trades on a P/E of 19.05x. This sits above the Consumer Services industry average P/E of 16.04x and the peer average of 16.93x, so on simple comparisons the stock carries a higher earnings multiple than both its sector and similar companies.

Simply Wall St’s Fair Ratio is an estimate of what a more suitable P/E might be when you factor in the company’s earnings growth profile, profit margins, industry, market cap and risk characteristics. For Service Corporation International, the Fair Ratio is 20.30x, which is higher than the current 19.05x P/E. That gap suggests the stock trades below the multiple implied by those fundamentals.

Result: UNDERVALUED

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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, so Narratives on Simply Wall St let you attach a clear story about Service Corporation International to the numbers by linking your view of its future revenue, earnings and margins to a forecast and a fair value. This updates that fair value automatically as new earnings or news arrive, and helps you compare it with the current share price. For example, one investor might build a Narrative around higher preneed sales, a 14.2% margin, a US$96.33 fair value and a higher future P/E of 23.3x. A more cautious investor might focus on cremation trends, debt and acquisition risks to justify a lower fair value. Both Narratives sit side by side in the Simply Wall St Community so you can see how different assumptions lead to different views on whether the stock looks expensive or cheap.

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.