Carriage Services, Inc. (CSV, $46.71): “Until Death Do Us Part”
By: Maddy Aubry, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Carriage Services, Inc. (NYSE:CSV) provides funeral and cemetery
products and services across the United States. The funeral segment offers
services to families related to the consultation, removal, and preparation of
remains, sale of caskets, and the use of visitation, remembrance, and transportation.
The cemetery segment provides interment rights and merchandise including makers
and outer burial containers.
• Management is looking forward to
new capital allocation opportunities related to acquisitions in 2021.
• CSV is seeing record breaking earnings.
• The outlook for the funeral and
cemetery industry will result in exciting things to come for CSV related to the
rising popularity of cremation.
• CSV is expected to outperform key
competitors over the next 3 years.
Key
points: After focusing on paying down debt in 2020 and into the beginning
of 2021, management is excited to announce that they are now able to focus on new,
more structured capital allocation framework and opportunities. Specifically,
they are looking forward to future acquisitions after completing a detailed
review and refresh of their strategic acquisition model that has been inspired
by their most recent acquisitions.
Over the last two years, CSV has
seen much transformation that has been strongly reflected in their earnings. During
that time, EBITDA has increased by nearly 70%, and, over the past twelve months,
EPS has increased by 116%. More specifically, CSV has seen record breaking earnings
so far this year. For the first half of 2021, CSV’s total revenue and EPS increased
19.3% and 83.5% respectively.
The funeral and cemetery industry,
including CSV, is focusing its efforts on new sales techniques and skillsets
that will generate success in the future. With the cremation option becoming
more popular, funeral directors can have meaningful conversations with families
and offer unique service options. With the addition of these personalized
celebrations of life, it offers opportunity to add value and continue to grow.
Management states that they are excited to gage perspective from younger
funeral directors and arrangers in terms of their mindset related to the
possibilities that come with cremation options, and they believe the upside is
tremendous.
Key competitors of Carriage
Services Inc include Service Corporation International (SCI) and Park Lawn
Corporation (PLC). Over the next three years, CSV is expected to be the fastest
growing, with the highest margin, while trading at the lowest valuation.
Specifically, CSV’s three-year EPS is expected to grow by over 100% whereas SCI’s
and PLC’s are expected to grow by about 40% and 70% respectively.
What
has the stock done lately?
After seeing a slight decline in
June and the start of a bounce back in July, CSV showed strong returns in the
month of August. CSV priced at its lowest in the first few days of July with a
price of about $34.58 but has recently reached a price high of $48.20 with a 1
month return of 26.21% and a month to date return of 1.04%.
Past
Year Performance: CSV has increased by 110.88% in value over the last
twelve months, and they are still performing strong to date. About 12 months
ago, CSV was aligned with the benchmark and seeing inconsistent activity. Over
the past 11 months, CSV has followed similar trends of the benchmark, but they
have consistently been outperforming.
Overall, Carriage Services, Inc
has been positively affected by the pandemic over the past year. While we are
all hoping the pandemic is in its final stages, it seems that CSV will continue
to provide strong returns for the remainder of the year and into next. With the
equity reaching 52-week highs and year to date returns nearing 50%, this seems
to be a holding to hang on to for a while longer.
