Yesterday, July 19, Seeking Alpha published a pretty in-depth investment article from Livingston Investments on funeral home and cemetery operator Service Corporation International. The article is entitled, “Service Corporation International: Crisis reslient business with a premium to fair price”. You can access the article here.
There was a couple of statements in the article that caught my eye:
- “Significant revenue growth was driven by the temporary impact of the coronavirus”
- “We have determined that the company’s weighted average cost of capital is 7.2%”
- “We believe that despite the expected growth rates of the industry, the company’s average annual revenue growth will be in line with the historical dynamics over the past 7 years and will amount to 2.3%”
- “The company has a high level of debt burden, about 20% of EBIT goes to cover the interest expense”
- “The expected slowdown in the growth rate of financial indicators will limit the company’s ability to reduce its debt burden.”
Funeral Director Daily take: This is a very good article complete with charts, facts, and opinions. I always have enjoyed reading these types of articles filled with numbers so that I could compare a large public company’s results with my own.
It was also interesting to me to see that the cost of capital, at least by the metric used by the author came to 7.2%. I find that quite high and would guess that most private individual operators who live by in-community bank financing could compare favorably with that rate.
Here’s a press release from the SCI website that shows that they are actively working to lower that aggregate rate. It is a previously available release that makes note that for $800 million in Senior Notes, they are reducing interest payments from 8% to 4%.
Disclaimer: The author of this article holds a stock position in Service Corporation International.
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