This company, primarily an operator of cemeteries and funeral home (78% of total revenue), has been grouped into funeral and cemeteries sector in professional service industry.
It seems that demand for cemetery product and service of companies in this sector, according to the typical company data, has been steadily growing in the past several years as indicated by the continuingly increased average comparable revenue (both charge and number of services) of some of companies. And it seems that demand for funeral home products and service has been relatively weak since 2014.
However, while the demand has been steady the intensive competition and increasing operation costs have been challenges for some smaller companies that have more difficulties in controlling costs and improving operation efficiency due to limit of scales. Therefore, we have seen shrinking margins among small companies in the past several years.
The typical gross margin (including overhead and selling) seems to be decreasing (down from about 25% in 2014 to 21% in 2017). While companies seem to be successful in controlling G&A spending (G&A as percentage of sales down to about 9% from 10%), their operating margin has gone down to about 12% in 2017.
The typical average stock Price/cash flow ratio is: 22. (Interest/EBI ratio of 38%).
It seems that the demand for funeral home products/service of this company has been stable and growing in the past three years as indicated by increasing comparable operating revenue in its
funeral home service. Its comparable cemetery operating revenue experienced decline in 2017 after two years’ strong growth.
Acquisition seems to be contributing significant increase in revenue for both funeral home and cemetery segments.
The fiscal 2017 compared with the 2016
Cemetery:
Revenue decreased 2.6% attributable to decrease of 1.8% in same store operating revenue and decrease of about 10% in trust earnings offset by increase in acquisition.
Funeral home:
Revenue increased 6.1% attributable to increase of 1.5% in same store operating revenue and increase of about 37% in acquisition.
The fiscal 2016 compared with 2015
Cemetery:
Revenue increased 3.6% attributable to increase of 5 % in same store operating revenue offset by decrease of about 5% in trust earnings.
Funeral home:
Revenue increased 1.9% attributable to increase of 19% in acquisition offset by decrease of 1.6% in same store operating revenue.
The fiscal 2015 compared with 2014
Cemetery:
Revenue increased 8% attributable to increase of 5% in same store operating revenue and increase of about 107% in acquisition.
Funeral home:
Revenue increased 7% attributable to increase of 3.3% in same store operating revenue and increase of about 21% in acquisition.
Its gross margin has gone down from 35% to 30% since 2014 attributable to fast increase in compensation and lower margin in cemetery segment. Offset by decrease in SG&A as percentage of sales (around 11%), its operating margin went down to about 19% in 2017.
Stock performance
This stock currently has a stock price/cash flow ratio of 18. We think that its stock is being relatively fairly valued compared with its peers.
