This company, primarily an owner and operator of cemeteries (82% of total revenue) and funeral home, 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 cemetery products/service of this company has been weak and growing slowly in the past three years as indicated by the fact that its recent increase in revenue from both products and service has been accompanied with huge selling spending. Demand for funeral product and service seems to grow in slower pace as compared with revenue from cemetery.
The revenue of most recent quarter increased due to increase of 5% in cemetery product.
The first nine months of fiscal 2017 compared with the same period of 2016
Cemetery:
Merchandise revenue increased about 8.1%.
Services revenue increased about 12%.
Funeral home:
Merchandise revenue increased about 0.2%.
Services revenue increased about 6%.
The fiscal 2016 compared with 2015
Cemetery:
Merchandise revenue increased about 5%.
Services revenue decreased about 3%.
Funeral home:
Merchandise revenue increased about 0.2%.
Services revenue increased about 6%.
The fiscal 2015 compared with 2014
Cemetery:
Merchandise revenue increased about 0.5%.
Services revenue decreased about 10% due to acquisition.
Funeral home:
Merchandise revenue increased about 30% due to acquisition.
Services revenue increased about 10% due to acquisition.
Its gross margin has been down from about 16% to 10% since 2014 reflecting a shrinking margin in products and service probably as a result of increased costs. With a flat increase in SG&A as percentage of sales (around 12% in 2017), its operating margin went down to about -2% in 2017.
Stock performance
This stock currently has a stock price/sales ratio of 0.7. We think that its stock is being relatively overvalued considering its inability to improve both sales and margins.
