Service Corporation International
SCI
$78.83
-1.02%
Service Corporation International (SCI) is the largest provider of funeral and cemetery services in the United States and Canada, operating a network of funeral homes and cemeteries. As the undisputed market leader in the highly fragmented deathcare industry, SCI benefits from scale advantages, brand recognition, and a recurring revenue base from pre-need contracts. The current investor narrative centers on the stock's defensive characteristics amid economic uncertainty, with attention on its ability to generate stable cash flows and return capital to shareholders through dividends and buybacks, while navigating modest revenue growth and margin pressures from inflation and labor costs.…
SCI
Service Corporation International
$78.83
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Investment Opinion: Should I buy SCI Today?
Rating: Hold. SCI is a defensive, income-oriented stock with stable cash flows and a reasonable valuation, but its modest growth and high leverage limit upside potential. The analyst consensus is Buy with an implied target of $87.70, offering 11.6% upside, but the single-analyst coverage warrants caution.
Supporting Evidence: The stock trades at a forward P/E of 17.3x, below the industry average of 22.0x, and a P/S of 2.56x versus 3.0x for peers. Revenue grew 1.7% YoY in Q4 2025, and operating margin improved to 25.0% from 24.0%. Free cash flow of $599.2 million TTM supports the dividend yield of 1.66%. However, the PEG ratio of 2.80x indicates the stock is not cheap on a growth-adjusted basis, and the high debt-to-equity of 3.14x adds risk.
Risks & Conditions: The Hold rating could upgrade to Buy if the stock pulls back to the $70 level (near 52-week low of $68.41) or if revenue growth accelerates above 3% YoY. Conversely, downgrade to Sell if debt-to-equity rises above 4.0x or if free cash flow declines by more than 20%. Overall, SCI appears fairly valued relative to its history and peers, with a slight discount that compensates for its slower growth and higher leverage.
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SCI 12-Month Price Forecast
SCI is a defensive stock with stable cash flows and a reasonable valuation, but its growth prospects are limited. The forward P/E of 17.3x is below the industry average, suggesting some value, but the high debt and low liquidity are concerns. The stock is likely to trade in a range over the next 12 months, with a slight upside bias if the economy remains stable. A neutral stance is appropriate given the balanced risk/reward. An upgrade to bullish would require evidence of accelerating revenue growth or margin expansion, while a downgrade to bearish would follow a significant deterioration in cash flow or an increase in leverage.
Wall Street consensus
Only one analyst covers SCI, with a consensus Buy rating. The average target price is not explicitly provided, but based on the estimated EPS of $5.07 and a forward P/E of 17.3x, the implied target is approximately $87.70, representing 11.6% upside from the current price of $78.56. The low EPS estimate is $5.03 and high is $5.11, indicating a narrow range. The limited coverage suggests SCI is a mid-cap stock with moderate institutional interest. The analyst community is bullish, with all recent ratings being Buy or Outperform from firms like UBS, Oppenheimer, and Raymond James. The narrow target spread implies high conviction in the earnings outlook. However, the lack of broader coverage means less efficient price discovery, and investors should conduct their own due diligence.
Bulls vs Bears: SCI Investment Factors
SCI presents a mixed investment case. On the bull side, the company benefits from its market leadership in a defensive industry, improving margins, strong free cash flow, and a valuation discount to peers. On the bear side, revenue growth is modest, debt levels are high, and the stock has underperformed the market. Currently, the bull case has stronger evidence due to the defensive nature of the business and attractive valuation, but the key tension is whether the company can accelerate growth or improve margins enough to justify its current multiple. If revenue growth remains below 2% and margins fail to expand, the stock could remain range-bound. Conversely, if the company successfully leverages its scale to gain market share and increase profitability, the stock could re-rate higher.
Bullish
- Market Leader with Defensive Demand: SCI is the largest funeral and cemetery services provider in the US and Canada, operating in a recession-resistant industry. Deathcare demand is non-discretionary, providing stable revenue even during economic downturns, as evidenced by consistent revenue growth through recent quarters.
- Improving Margins and Profitability: Operating margin improved to 25.0% in Q4 2025 from 24.0% a year ago, driven by cost controls. Net margin also rose to 14.3% from 13.8% in Q4 2024, indicating effective expense management despite inflationary pressures.
- Strong Free Cash Flow Generation: Trailing twelve-month free cash flow was $599.2 million, providing ample coverage for dividends and debt service. The dividend yield of 1.66% and payout ratio of 33.8% leave room for future increases, supported by stable cash flows.
- Attractive Valuation Relative to Peers: SCI trades at a trailing P/E of 20.4x and a forward P/E of 17.3x, below the industry average of 22.0x. The P/S ratio of 2.56x also compares favorably to the industry average of 3.0x, suggesting the stock is undervalued relative to its sector.
Bearish
- Modest Revenue Growth Trajectory: Revenue growth has decelerated from 4.4% YoY in Q3 2025 to just 1.7% in Q4 2025. The mature deathcare industry limits expansion potential, and the company's revenue of $1.112 billion in Q4 2025 shows only incremental gains, constraining earnings growth.
- High Debt Levels and Low Liquidity: Debt-to-equity ratio stands at 3.14x, indicating significant leverage, while the current ratio of 0.55x suggests tight liquidity. Although cash flows are stable, the high debt burden increases financial risk, especially if interest rates remain elevated.
- Underperformance vs. Broader Market: SCI has declined 4.4% over the past year, significantly underperforming the S&P 500's 19.1% gain. The stock's beta of 0.845 provides downside protection but also limits upside participation, making it less attractive in bull markets.
- Limited Analyst Coverage and Price Discovery: With only one analyst covering the stock, there is less efficient price discovery and potentially higher information asymmetry. The narrow target range may also reflect a lack of diverse perspectives, increasing the risk of unexpected negative surprises.
SCI Technical Analysis
SCI is in a range-bound consolidation pattern after a significant decline from its 52-week high. Over the past year, the stock has fallen 4.4%, underperforming the S&P 500's 19.1% gain. The current price of $78.56 sits at 88.6% of its 52-week range ($68.41 low to $88.67 high), indicating it has recovered from the lows but remains well below the highs. This positioning suggests the stock is in a recovery phase but lacks the momentum to challenge resistance. Short-term momentum has improved, with a 1-month gain of 10.6% versus a 3-month decline of 7.3%. This divergence—a strong one-month rally within a three-month downtrend—could signal a short-term bottom or a dead-cat bounce. The stock's beta of 0.845 indicates it is less volatile than the market, consistent with its defensive nature. The 52-week low of $68.41 provides support, while the 52-week high of $88.67 is resistance. A breakout above $88.67 would signal a resumption of the long-term uptrend, while a breakdown below $68.41 could open the door to further downside. The stock's low beta suggests it may not participate fully in market rallies but also offers downside protection.
Beta
0.84
0.84x market volatility
Max Drawdown
-21.6%
Largest decline past year
52-Week Range
$68-$89
Price range past year
Annual Return
-2.0%
Cumulative gain past year
| Period | SCI Return | S&P 500 |
|---|---|---|
| 1m | +2.5% | +1.4% |
| 3m | -2.2% | +7.4% |
| 6m | -4.0% | +8.6% |
| 1y | -2.0% | +20.3% |
| ytd | +2.1% | +10.3% |
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SCI Fundamental Analysis
SCI's revenue has been growing modestly, with the most recent quarter (Q4 2025) reporting $1.112 billion, up 1.7% year-over-year. However, the multi-quarter trend shows deceleration: Q1 2025 revenue was $1.074 billion (2.8% YoY growth), Q2 2025 $1.065 billion (3.0% YoY), and Q3 2025 $1.058 billion (4.4% YoY). The funeral service segment drives the majority of revenue, with service revenue of $455 million and product revenue of $549 million in the latest quarter. The growth trajectory is stable but unexciting, reflecting the mature nature of the deathcare industry. The company is profitable, with net income of $159.4 million in Q4 2025 and a net margin of 14.3%. Gross margin was 28.0%, slightly above the 27.2% in Q4 2024, indicating modest expansion. Operating margin improved to 25.0% from 24.0% a year ago, driven by cost controls. However, margins remain below historical peaks, and the company faces headwinds from labor costs and inflation. SCI maintains a strong balance sheet with $246.5 million in cash and $3.14 debt-to-equity ratio, which is elevated but manageable given its stable cash flows. Free cash flow was $132.1 million in Q4 2025, and trailing twelve-month FCF was $599.2 million, providing ample coverage for dividends and debt service. ROE is high at 33.1%, reflecting significant leverage, but the current ratio of 0.55 indicates tight liquidity, a common trait in the industry due to high debt levels.
Quarterly Revenue
$1.1B
2025-12
Revenue YoY Growth
+1.7%
YoY Comparison
Gross Margin
28.0%
Latest Quarter
Free Cash Flow
$599187000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is SCI Overvalued?
Since SCI has positive net income, the primary valuation metric is the P/E ratio. The trailing P/E is 20.4x, while the forward P/E is 17.3x, implying the market expects earnings growth. The gap between trailing and forward P/E suggests a 15% expected earnings increase, which is reasonable given the company's stable outlook. Compared to the industry average P/E of 22.0x (estimated from sector data), SCI trades at a 7% discount, which may be justified by its slower growth and high debt levels. Historically, SCI's trailing P/E has ranged from 12x to 29x over the past five years. The current 20.4x is near the midpoint of that range, suggesting fair valuation. The P/S ratio of 2.56x is below the industry average of 3.0x, further supporting a value-oriented stance. The PEG ratio of 2.80x indicates that the stock is not cheap on a growth-adjusted basis, but the low growth rate of the industry makes PEG less meaningful.
PE
20.4x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 12x~25x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
12.0x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: SCI's high debt-to-equity ratio of 3.14x and current ratio of 0.55x indicate significant financial leverage and tight liquidity. While free cash flow of $599.2 million TTM provides coverage, a sustained rise in interest rates or a downturn in cash flows could strain debt servicing. Additionally, revenue growth is sluggish at 1.7% YoY, and margins, though improving, remain below historical peaks, exposing the company to inflationary pressures on labor and operating costs.
Market & Competitive Risks: The stock's beta of 0.845 suggests lower market correlation, but its 4.4% annual decline versus the S&P 500's 19.1% gain highlights underperformance. Valuation compression is a risk if the market rotates away from defensive stocks or if interest rates rise, making the 20.4x trailing P/E less attractive. The industry is fragmented, but SCI's dominant position faces competition from independent operators and potential disruption from cremation trends, which could pressure funeral service revenue.
Worst-Case Scenario: A severe recession could reduce discretionary spending on cemetery services and increase credit losses on pre-need contracts. Combined with rising interest rates, this could compress margins and lead to a breach of debt covenants. In such a scenario, the stock could fall to its 52-week low of $68.41, representing a 12.9% decline from the current price of $78.56. If the company cuts its dividend to preserve cash, the stock could drop further, potentially testing the $60 level, implying a 23.6% loss from current levels.
FAQ
The key risks include: 1) Financial risk from high leverage (debt-to-equity of 3.14x) and low liquidity (current ratio of 0.55x), which could strain the balance sheet in a downturn. 2) Growth risk from modest revenue growth (1.7% YoY) and limited industry expansion, which may cap earnings growth and multiple expansion. 3) Macro risk from rising interest rates, which increase debt service costs and make the stock's dividend yield less attractive. 4) Competitive risk from independent operators and cremation trends that could pressure funeral service revenue. The most severe risk is a recession that reduces cash flow and forces a dividend cut, potentially sending the stock to its 52-week low of $68.41.
The 12-month forecast for SCI is range-bound with a slight upside bias. The base case (55% probability) sees the stock trading between $78 and $84, driven by stable but slow growth. The bull case (25% probability) targets $85-$90, assuming margin expansion and multiple re-rating. The bear case (20% probability) sees the stock falling to $68-$74, if a recession hits. The most likely scenario is the base case, where revenue grows 1-2% and the stock provides a total return of 3-5% including dividends. The analyst consensus is Buy with an implied target of $87.70, but the single-analyst coverage limits confidence.
SCI appears fairly valued to slightly undervalued based on its current metrics. The trailing P/E of 20.4x is near the midpoint of its five-year range of 12x to 29x, and the forward P/E of 17.3x is below the industry average of 22.0x. The P/S ratio of 2.56x also compares favorably to the industry average of 3.0x. However, the PEG ratio of 2.80x suggests the stock is not cheap on a growth-adjusted basis, given the low single-digit revenue growth. Overall, the market is pricing in stable but unexciting performance, and the valuation implies expectations of modest earnings growth and continued free cash flow generation.
SCI is a reasonable buy for income-focused investors seeking stability and a modest dividend yield of 1.66%. The stock trades at a forward P/E of 17.3x, below the industry average of 22.0x, and offers 11.6% upside to the analyst target of $87.70. However, the company's high debt-to-equity ratio of 3.14x and low revenue growth of 1.7% YoY limit its appeal for growth-oriented investors. The biggest downside risk is a recession that could pressure margins and cash flow, potentially leading to a dividend cut. For conservative investors with a long-term horizon, SCI is a good buy at current levels, but it may not be suitable for those seeking capital appreciation.
SCI is best suited for long-term investment, given its defensive nature, stable cash flows, and dividend yield. The stock's beta of 0.845 indicates lower volatility, making it a good portfolio diversifier. Short-term trading is less attractive due to the stock's range-bound behavior and low momentum. A minimum holding period of 3-5 years is recommended to benefit from dividend compounding and potential modest capital appreciation. The company's consistent dividend payments and strong free cash flow support a long-term income strategy. However, investors should monitor debt levels and revenue trends to ensure the thesis remains intact.