After Friday’s market close I thought it might be a good time to check up with what has happened in the Death Care industry since the beginning of the year. As you know the Funeral Director Daily Death Care Index (DCI) is made up of the value of one share of stock for eight different death care industry companies.
While we have found that major market indices are rather flat for the year, we have noticed that the DCI has dropped over 12% of its value since January 1. We will give you our impressions as to why that has been.
First of all, here is how the major indices in the United States have fared since January 1.
- NASDAQ – Up 1.3% from 6875 to 6969
- Dow Jones Average – Down 1.34% from 24,719 to 24,388
- S & P 500 – Down 1.0% from 2659 to 2633
The DCI has dropped from $296.45 on January 1 to $258.87 as of the close of business last Friday. That is a drop of 12.87% since January 1. We see that only Security National Financial Corporation, the funeral home operator based in Utah, and Service Corporation International are buoying up the index while the other six index members have declined in value.
We have noticed that funeral and cemetery operators Carriage Services, StoneMor, and Park Lawn Corporation have all lost value since January 1. Specifically, it appears that Carriage Services has lost about 40% of its market value in that time period and most of that has been since they missed on their earnings estimate for the last quarter.
StoneMor has dropped to $2.99 per share from a January 1 price of $6.56 — that’s a 55% drop. We believe that StoneMor is working hard and changing some things to right the ship, but like Carriage Services, if you are set up to be in the traditional funeral services realm and your clients have started to choose less services, it is an uphill climb back to full profitability.
We also think the jury is really out on Park Lawn Corporation. As we have said before, they are doing the delicate balancing act of being a growth company while at the same time producing monthly dividend income to their stockholders. They seem to be aggressive in their acquisitions as evidenced by their press release which stated that they paid a 9.8x EBITDA in their Signature Group acquisition. We think that while many people believe that they can generate revenue growth, the question is if that growth will filter to the bottom line.
On the contrary, we see Service Corporation International with a mix of death care service businesses and what we believe the market sees as a more realistic look at how the business will evolve moving forward. SCI has a size to them that allows it to realistically shift costs of technology programs (like its new Beacon program) among its units to allow for an affordability factor. SCI has a long history of successful operation and we believe it is that history that has the market encouraged about its upside as can be seen with a $44 share price as compared to a $37 share price on January 1 — that’s almost a 20% gain to those invested in that company for 2018.