Value investor and self-described contrarian investor John Snyder wrote an article for Seeking Alpha that you can read here entitled, “Why I’m buying StoneMor”. We will leave the facts at that and I will give my opinion on the piece below.
Funeral Director Daily take: This is an article that will cause all experienced funeral directors to take a look at what numbers and ratios matter in their business. Snyder comes to his conclusion by comparing public companies StoneMor Partners and Carriage Services in a number of ratio categories.
Snyder breaks out operating results by funeral home and cemetery segments for the companies and then opines that “operating profits per unit” are greater for Carriage Services than for StoneMor Partners in both segments. He also breaks out that “Revenue per Unit” is greater for Carriage Services than StoneMor and that Operating Margin is also better for Carriage Services.
Snyder then comes to a conclusion that StoneMor just has to produce more revenue from clientele and reduce their operating costs in line with Carriage to put an upward break out on the stock price.
In my opinion, that conclusion can be correct, but in the death care industry that is a tall task. Depending on the individual funeral homes and cemeteries owned and what their individual call numbers are – raising those measures is probably much easier said than done. And lowering expenses to create better margins is very difficult in a services oriented business where you need people. Again, in my opinion, thinking like Wal-Mart is not a way you would think about death care and improving a death care business’ financial performance.
Also, one has to question if StoneMor Partners and Carriage Services, while both in the death care realm, are really comparable companies. I know StoneMor has cemeteries in areas like the Philadelphia market which may be operated greatly different from the properties Carriage owns in suburban and some rural markets. The costs to operate in different markets could be vastly different.
Again, an interesting article, but one you may not agree with on all items. I found it an very good read and a way to put the little I know of funeral home and cemetery operations into an intellectual exercise in thought.