SCI
SCI
Hold 2026-05-07
Model
Dual
Price at Report
$78.44
Base IV
$80.35
Bear IV
$60.08
Bull IV
$120.35
Entry Zone: 57-74 · Sell Above: 102
Bore Family Office
Valuation Report — Service Corporation International (SCI) • May 7, 2026
DCF + DDM • Discount Rate: 7.50% • Current Price: $78.44
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Service Corporation International is North America's largest provider of deathcare products and services, operating 1,487 funeral homes and 503 cemeteries across 44 states, 8 Canadian provinces, DC, and Puerto Rico under the Dignity Memorial® brand. The company serves approximately 700,000 families annually and benefits from demographic tailwinds as the aging U.S. population drives long-term demand growth. SCI's unmatched scale provides significant operating leverage and pricing power in a highly fragmented industry.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Funeral Operations | $2,150M | 50% | +2.0% | — | At-need services + preneed contracts; avg revenue per service growing 3% YoY; Q1 2026 volumes declined 6% YoY (flu season compare) |
| Cemetery Operations | $2,160M | 50% | +4.0% | — | Preneed cemetery sales production +10% in Q1 2026; strong property development pipeline; 120bp gross margin improvement YoY |
| Blended Growth Rate | — | 100% | +3.0% | — | Weighted avg across segments |
📊 Business Lifecycle Stage
Stage 1
Startup
Startup
Stage 2
Hyper Growth
Hyper Growth
Stage 3
Self Funding
Self Funding
Stage 4
Operating Leverage
Operating Leverage
Stage 5
Capital Return
Capital Return
Stage 6
Decline
Decline
Stage 3 — Mature Cash Cow: Revenue growing rapidly, approaching breakeven. FCF turning positive — DCF is appropriate with normalized near-breakeven years.
Why this drives model selection: FCF turning positive — DCF appropriate with normalized near-breakeven years.
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 34.0% | ≥12% strong |
| FCF Margin | 12.9% | ≥10% strong |
| Debt / EBITDA | 3.9x | 2–4x moderate |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Stable (±1pp) | Directional margin trajectory |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $4,143 | $4,109 | $4,100 | $4,186 | $4,309 |
| Rev YoY Growth | — | -0.8% | -0.2% | +2.1% | +2.9% |
| Gross Margin | 31.9% | 28.1% | 26.6% | 26.1% | 26.5% |
| EBITDA ($M) | $1,475 | $1,222 | $1,262 | $1,263 | $1,327 |
| EBITDA Margin | 35.6% | 29.7% | 30.8% | 30.2% | 30.8% |
| Operating Income ($M) | $1,191 | $927 | $944 | $928 | $978 |
| Operating Margin | 28.7% | 22.6% | 23.0% | 22.2% | 22.7% |
| Net Income ($M) | $803 | $565 | $537 | $519 | $543 |
| Net Margin | 19.4% | 13.8% | 13.1% | 12.4% | 12.6% |
| EPS (diluted) | $4.72 | $3.53 | $3.53 | $3.53 | $3.80 |
| Free Cash Flow ($M) | $617 | $456 | $507 | $571 | $554 |
| Annual DPS | $0.880 | $1.020 | $1.120 | $1.200 | $1.300 |
| Total Debt ($M) | $3,966 | $4,342 | $4,713 | $4,835 | $5,140 |
💹 Capital Return & Share Count Analysis
Net Share Change
-15.9% (2021→2025)
📉 Net reduction — buybacks exceed issuances
EPS Amplification
EPS grew -19.5% vs net income -32.4% over the period — +12.9pp of EPS growth amplified by share reduction.
| Year | Diluted Shares (M) | YoY Change | Buyback Spend ($M) | Buyback Yield |
|---|---|---|---|---|
| 2021 | 170.0M | — | $554 | 4.2% |
| 2022 | 160.0M | -5.9% | $661 | 5.3% |
| 2023 | 152.0M | -5.0% | $545 | 4.6% |
| 2024 | 147.0M | -3.3% | $254 | 2.2% |
| 2025 | 143.0M | -2.7% | $461 | 4.1% |
SCI has reduced diluted shares from 170M (2021) to 143M (2025), a 15.9% reduction in four years. Buyback yield has averaged ~3.3% annually. Combined with the 1.7% dividend yield, total shareholder yield is approximately 5.0%. The board authorized an additional $500M repurchase program in Q4 2025, signaling continued commitment.
📈 Dual Scenarios
$60
🔴 Bear
$80
📊 Base
$120
🚀 Bull
$78.44
Current Price
$95
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 4.5% | 3.0% | 2.0% | 8.00% | $60 | ▼23.4% |
| 📊 Base | 5.5% | 3.5% | 2.5% | 7.50% | $80 | ▲2.4% |
| 🚀 Bull | 7.5% | 5.0% | 3.0% | 7.00% | $120 | ▲53.4% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 4.5% | Stage 2: 3.0% | Terminal: 2.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.71B | $0.66B | $0.66B |
| Year 2 ✦ | Stage 1 | $0.74B | $0.64B | $1.30B |
| Year 3 | Stage 1 | $0.78B | $0.62B | $1.91B |
| Year 4 | Stage 1 | $0.81B | $0.60B | $2.51B |
| Year 5 | Stage 1 | $0.85B | $0.58B | $3.09B |
| Year 6 | Stage 2 | $0.88B | $0.55B | $3.64B |
| Year 7 | Stage 2 | $0.90B | $0.53B | $4.17B |
| Year 8 | Stage 2 | $0.93B | $0.50B | $4.67B |
| Year 9 | Stage 2 | $0.96B | $0.48B | $5.15B |
| Year 10 | Stage 2 | $0.99B | $0.46B | $5.61B |
| Terminal | — | TV=$16.8B | PV(TV)=$7.8B (58% of EV) | EV=$13.4B |
| Intrinsic Value | — | — | EV $13.4B − Net Debt → Equity / Shares | $60 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (8.00%) to get its present value. After Year 10, FCF grows at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $16.8B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $7.8B). Enterprise Value = PV of FCFs ($5.6B) + PV of TV ($7.8B) = $13.4B. Subtracting net debt gives equity value of $8.5B, divided by shares outstanding = $60 per share.
Base Scenario
Stage 1: 5.5% | Stage 2: 3.5% | Terminal: 2.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.71B | $0.66B | $0.66B |
| Year 2 ✦ | Stage 1 | $0.74B | $0.64B | $1.31B |
| Year 3 | Stage 1 | $0.79B | $0.63B | $1.94B |
| Year 4 | Stage 1 | $0.83B | $0.62B | $2.56B |
| Year 5 | Stage 1 | $0.87B | $0.61B | $3.17B |
| Year 6 | Stage 2 | $0.91B | $0.59B | $3.75B |
| Year 7 | Stage 2 | $0.94B | $0.56B | $4.32B |
| Year 8 | Stage 2 | $0.97B | $0.54B | $4.86B |
| Year 9 | Stage 2 | $1.00B | $0.52B | $5.39B |
| Year 10 | Stage 2 | $1.04B | $0.50B | $5.89B |
| Terminal | — | TV=$21.3B | PV(TV)=$10.3B (64% of EV) | EV=$16.2B |
| Intrinsic Value | — | — | EV $16.2B − Net Debt → Equity / Shares | $80 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (7.50%) to get its present value. After Year 10, FCF grows at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $21.3B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $10.3B). Enterprise Value = PV of FCFs ($5.9B) + PV of TV ($10.3B) = $16.2B. Subtracting net debt gives equity value of $11.3B, divided by shares outstanding = $80 per share.
✦ Year-by-year analyst consensus FCF estimates (Base scenario)
Bull Scenario
Stage 1: 7.5% | Stage 2: 5.0% | Terminal: 3.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.71B | $0.66B | $0.66B |
| Year 2 ✦ | Stage 1 | $0.74B | $0.65B | $1.31B |
| Year 3 | Stage 1 | $0.80B | $0.65B | $1.97B |
| Year 4 | Stage 1 | $0.86B | $0.66B | $2.62B |
| Year 5 | Stage 1 | $0.93B | $0.66B | $3.28B |
| Year 6 | Stage 2 | $0.97B | $0.65B | $3.93B |
| Year 7 | Stage 2 | $1.02B | $0.64B | $4.57B |
| Year 8 | Stage 2 | $1.07B | $0.62B | $5.19B |
| Year 9 | Stage 2 | $1.12B | $0.61B | $5.80B |
| Year 10 | Stage 2 | $1.18B | $0.60B | $6.40B |
| Terminal | — | TV=$30.4B | PV(TV)=$15.5B (71% of EV) | EV=$21.9B |
| Intrinsic Value | — | — | EV $21.9B − Net Debt → Equity / Shares | $120 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (7.00%) to get its present value. After Year 10, FCF grows at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $30.4B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $15.5B). Enterprise Value = PV of FCFs ($6.4B) + PV of TV ($15.5B) = $21.9B. Subtracting net debt gives equity value of $17.0B, divided by shares outstanding = $120 per share.
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 5.5% | $130 | $148 | $171 | $203 | $251 |
| 6.0% | $111 | $124 | $141 | $163 | $194 |
| 6.5% | $96 | $106 | $119 | $134 | $155 |
| 7.0% | $84 | $92 | $101 | $113 | $128 |
| 7.5% | $74 | $80 | $87 | $96 | $108 |
| 8.0% | $65 | $70 | $76 | $83 | $92 |
| 8.5% | $58 | $62 | $67 | $72 | $79 |
| 9.0% | $51 | $55 | $59 | $63 | $69 |
| 9.5% | $46 | $48 | $52 | $56 | $60 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🌊 Elliott Wave Analysis
Elliott Wave structure analysis based on 500 days of price history. Current position and wave progress help evaluate entry timing.
| Structure | Type | Span | Waves | Score | Rules |
|---|---|---|---|---|---|
| Impulse 1 | Impulse | $69.56 → $86.48 | 1→2→3→4→5 | 10.9 | R1:100 R2:100 R3:100 |
| Correction 2 | Correction | $86.48 → $72.36 | A→B→C | 8.1 | R1:100 R2:100 R3:100 |
| Impulse 3 (partial) | Impulse | $72.36 → $78.29 | 1 | 4.3 | R1:100 R2:100 R3:100 |
Current position: In Impulse 3, Wave 1
🏦 Comparable Valuation
| Company | Ticker | P/E | EV/EBITDA | Div Yield | 5Y EPS CAGR |
|---|---|---|---|---|---|
| Service Corp Intl | SCI | 19.7x | 12.0x | 1.73% | ~9% |
| Rollins | ROL | 48.3x | 28.6x | 1.28% | ~12% |
| Cintas | CTAS | 38.5x | 25.1x | 0.79% | ~15% |
| Waste Management | WM | 31.2x | 16.8x | 1.45% | ~10% |
| Republic Services | RSG | 28.9x | 15.2x | 1.62% | ~9% |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $1.360 |
| Current Yield | 1.73% |
| Consecutive Growth Years | 12 |
| 1-yr DPS CAGR | +8.2% |
| 3-yr DPS CAGR | +6.5% |
| 5-yr DPS CAGR | +10.6% |
| 10-yr DPS CAGR | +4.4% |
| Payout Ratio (DPS/EPS) | 34.8% |
| FCF Payout Ratio | 33.2% |
| Sustainability Verdict | Safe — low payout ratio with ample FCF coverage |
SCI's dividend is well-covered with a 34.8% EPS payout ratio and 33.2% FCF payout. The 12-year growth streak and 10.6% 5-year CAGR demonstrate strong commitment. The low payout leaves ample room for continued double-digit increases and buybacks.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $4.72 | — | — | — | Actual |
| 2022 | $3.53 | — | — | — | Actual |
| 2023 | $3.53 | — | — | — | Actual |
| 2024 | $3.53 | — | — | — | Actual |
| 2025 | $3.80 | — | — | — | Actual |
| 2026 | $3.99 | $4.21 | $4.45 | 8 | Estimate |
| 2027 | $4.41 | $4.63 | $4.89 | 8 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $4.1B | — | — | — | Actual |
| 2022 | $4.1B | — | — | — | Actual |
| 2023 | $4.1B | — | — | — | Actual |
| 2024 | $4.2B | — | — | — | Actual |
| 2025 | $4.3B | — | — | — | Actual |
| 2026 | $4.3B | $4.5B | $4.7B | 8 | Estimate |
| 2027 | $4.5B | $4.6B | $4.9B | 8 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $95.00 | Range $90–$100
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Tomohiko Sano | JP Morgan | Buy | $100 | +27.5% |
| Scott Schneeberger | Oppenheimer | Buy | $97 | +23.7% |
| A.J. Rice | UBS | Strong Buy | $93 | +18.6% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q1 2026 | $0.97 vs $1.00 | $-0.03 ❌ | $1.1B vs $1.1B | +$0.0B ✅ | Confirmed 2026 guidance |
| Q4 2025 | $1.14 vs $1.11 | +$0.03 ✅ | $1.1B vs $1.1B | +$0.0B ✅ | Provided 2026 outlook |
| Q3 2025 | $0.88 vs $0.85 | +$0.03 ✅ | $1.1B vs $1.0B | +$0.0B ✅ | — |
| Q2 2025 | $0.81 vs $0.79 | +$0.02 ✅ | $1.1B vs $1.1B | +$0.0B ✅ | — |
(e) Confidence Band Commentary
Analyst coverage is thin (4 analysts), but consensus is unanimously bullish (Strong Buy / Buy). Q1 2026 EPS missed slightly ($0.97 vs $1.00 est) due to funeral volume decline, but revenue beat and management reaffirmed full-year guidance ($4.05–$4.35 adj EPS). The tight PT range ($90–$100) reflects high conviction around SCI's defensive, cash-generative model. Key risk: funeral volume volatility quarter-to-quarter (flu season, demographic timing).
💡 Investment Thesis
- Demographic tailwind: U.S. deaths projected to grow ~1-2% annually through 2040+ as Boomers age. SCI's 1,487 funeral homes and 503 cemeteries capture outsized share in a $20B+ industry.
- Pricing power & scale: Dignity Memorial® brand premium supports 3%+ annual average revenue growth per service. Unmatched geographic density enables operating leverage competitors cannot replicate.
- Capital allocation excellence: 12 consecutive years of dividend increases (5-yr CAGR ~10.6%), systematic buybacks (3.3% yield, $461M in FY2025), and disciplined tuck-in M&A (22 funeral homes + 2 cemeteries in 2025).
- Preneed pipeline: Preneed funeral sales +6%, preneed cemetery sales +10% in Q1 2026 — these contracts convert to at-need revenue over 5-15 years, providing a high-visibility revenue floor.
- Defensive business model: Deathcare is recession-resistant with high switching costs. FCF margin of 12-13% consistently funds dividends, buybacks, and cemetery development without leverage increase.
👔 Management Quality & Culture
CEO: Not identified · Tenure: Since 2005 (~21 yrs)
Net Insider Buys (12m)
-133,890 shares
Incentive Alignment
⚠️ Moderate
Compensation: Equity-based compensation present
CEO Background & Track Record
Service Corporation International Executive & Employee Infor
The following section provides information on Service Corporation International’s senior management, executives, CEO and key decision makers and their roles in the organization.
The following section provides information on Service Corporation International’s senior management, executives, CEO and key decision makers and their roles in the organization.
Service Corporation International (SCI) Leadership & Managem
Service International's CEO is Tom Ryan, appointed in Feb 2005, has a tenure of 21.75 years. total yearly compensation is $11.77M, comprised of 10.2% salary and 89.8% bonuses, including company stock and options. direc
Service International's CEO is Tom Ryan, appointed in Feb 2005, has a tenure of 21.75 years. total yearly compensation is $11.77M, comprised of 10.2% salary and 89.8% bonuses, including company stock and options. direc
Tom Ryan, Service Corp Intl: Profile and Biography - Bloombe
Tom Ryan is Chairman/CEO at Service Corp Intl. See Tom Ryan's compensation, career history, education, & memberships.
Tom Ryan is Chairman/CEO at Service Corp Intl. See Tom Ryan's compensation, career history, education, & memberships.
Capital Allocation & Strategy
Service Corporation at Oppenheimer Conference: Strategic Ins
Free cash flow for 2025 is projected at $550 million, with capital allocated to dividends, acquisitions, and share repurchases. ... - Increased by 13% in 2020, 4% in 2021, then decreased by 4-5% in 2022, 5-6% in 2023, and 2.5% in 20
Free cash flow for 2025 is projected at $550 million, with capital allocated to dividends, acquisitions, and share repurchases. ... - Increased by 13% in 2020, 4% in 2021, then decreased by 4-5% in 2022, 5-6% in 2023, and 2.5% in 20
SERVICE CORPORATION INTERNATIONAL ANNOUNCES FOURTH QUARTER 2
Our robust cash flow for the year allowed us to invest $181 million into the acquisition of 26 funeral homes and 6 cemeteries in major metropolitan markets and $62 million into real estate transactions to expand our footpri
Our robust cash flow for the year allowed us to invest $181 million into the acquisition of 26 funeral homes and 6 cemeteries in major metropolitan markets and $62 million into real estate transactions to expand our footpri
Employee Ratings
Overall Rating
3.0/5 ★★★☆☆
Culture Signal
Mixed
✅ Strengths
- recommend
Employee Review Excerpts
Service Corporation International "employee" Reviews | Glass
Employees also rated Service Corporation International 3.0 out of 5 for work life balance, 3.1 for culture and values and 3.4 for career opportunities. What are the pros and cons of working at Service Corporation Internatio
Employees also rated Service Corporation International 3.0 out of 5 for work life balance, 3.1 for culture and values and 3.4 for career opportunities. What are the pros and cons of working at Service Corporation Internatio
Service Corporation International - SCI REview | Glassdoor
Current employee · Dallas, TX · Recommend · CEO approval · Business Outlook · Pros · Good insurance benefits, 401K, growth · Cons · parts of management can be difficult · Show more · Sign in to see more insights · 5.0 · Oct 1, 2025 · Front
Current employee · Dallas, TX · Recommend · CEO approval · Business Outlook · Pros · Good insurance benefits, 401K, growth · Cons · parts of management can be difficult · Show more · Sign in to see more insights · 5.0 · Oct 1, 2025 · Front
Service Corporation International - Management experience |
Oct 1, 2025 · Front desk receptionist ... · Business Outlook · Pros · Working for SCI was great, I felt supported and that I always had help when needed, Coworkers and others I worked with supported my goals and were good team playe
Oct 1, 2025 · Front desk receptionist ... · Business Outlook · Pros · Working for SCI was great, I felt supported and that I always had help when needed, Coworkers and others I worked with supported my goals and were good team playe
Sources: Finnhub insider data · Brave Search (Glassdoor, Indeed, Comparably, news) · Earnings surprise data from analyst forecasts · Qualitative signals are directional only.
⚖️ Dual Verdict: Hold — Service Corporation International (SCI)
Current price: $78.44 | Analyst Avg PT: $95.00
$60
🔴 Bear
$80
📊 Base
$120
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$74 | Begin position |
| Tier 2 — Add | ≤$70 | Add on weakness |
| Tier 3 — Full | ≤$57 | Full allocation |
| Sell Alert | ≥$102 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Verdict: Hold. At $78.44, the shares sit in a reasonable range relative to the base-case value of $80. Add only on weakness toward the entry tiers below.
📂 Current Position Summary
| Metric | Value |
|---|---|
| Shares Held | 2,761 |
| Average Cost Basis | $78.00 |
| Current Market Value | $216,573 |
| Unrealized P&L | $+1,215 (+0.6%) |
| Annual DPS | $1.360/yr |
| Annual Dividend Income | $3,755/yr |
| Current Yield (at price) | 1.73% |
| Yield on Cost | 1.74% |
| vs Target (~$200K) | $216,573 / $200,000 (108%) |
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| WACC Build (7.5%) | Rf = 4.3% (10Y UST), β = 0.89, ERP = 5.5% → Ke = 4.3% + 0.89×5.5% = 9.2%. Kd = 5.3% (avg coupon on $5.1B debt, post-tax ~4.0%). Capital structure: Equity $11.1B (78%), Debt $5.1B (22%) at market weights. WACC = 78%×9.2% + 22%×4.0% = 7.2% + 0.9% = 8.1%. Rounded DOWN to 7.5% to reflect SCI's below-market beta (0.89) and recession-resistant cash flows. The 60bp haircut vs raw CAPM is justified by SCI's defensive business model — deathcare demand is non-cyclical. |
| Cost of Equity (8.2%) | Ke = 9.2% per CAPM (Rf 4.3% + β 0.89 × ERP 5.5%). We apply a 100bp haircut to 8.2% for the DDM to reflect SCI's defensive profile and low historical volatility. DDM uses Ke (not WACC) as dividends are equity cash flows. Note: DDM values are low ($30-41 range) because SCI's 1.73% dividend yield doesn't capture ~$461M annual buybacks. The DCF model is the primary valuation; DDM is shown as a cross-check only. |
| FCF Base ($710M — Forward Maintenance FCF) | FY2025 GAAP FCF = $554M (Op CF $943M − Total Capex $389M). However, total capex includes ~$165M of cemetery development (growth capex creating future revenue) and ~$120M of acquisitions. Using GAAP FCF penalizes SCI for investing in growth. Instead, we use forward maintenance FCF from FY2026 guidance: Adj OpCF midpoint $1,035M − Maintenance Capex $325M = $710M. This includes cemetery development in the maintenance base (SCI considers it recurring), but excludes discretionary acquisition spend. This is the same approach equity analysts use when modeling SCI's cash generation capacity. |
| DPS Base ($1.36) | Current annualized DPS = $1.36 (4 × $0.34, raised in Dec 2025). FY2025 declared DPS was $1.30; 2026 annualized is $1.36 (+4.6%). 12 consecutive years of increases, 5-yr CAGR 10.6%. Payout ratio 34.8% leaves ample room for continued growth. |
| Growth Calibration | Management's long-term framework: 8-12% EPS growth. Stage 1 FCF growth set at 5.5% (base) — below EPS target because: (1) FCF bears dilution from growth capex, (2) Q1 2026 funeral volumes declined 6% YoY (tough flu season compare), (3) share count reduction (~3%/yr) amplifies EPS beyond FCF growth. DPS growth uses similar stage rates. Preneed pipeline is strong (+6% funeral, +10% cemetery in Q1 2026), providing high visibility revenue floor over next 5-15 years. |
| Sanity Check | DCF base IV of ~$87 vs analyst consensus PT of $95 (−8.1%) — within ±20% tolerance. The gap reflects our conservative FCF growth assumption (5.5% vs ~9% implied by analyst PTs). DDM base IV is ~$31 — very low because SCI's 1.73% dividend yield doesn't capture ~$461M/yr in buybacks (3.3% buyback yield). The DCF model is the primary valuation driver; DDM is a cross-check. A Shareholder Yield DDM would better capture buybacks but SCI's FCF payout (33.2%) is well below the 60% threshold required for that model. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.