Carriage Services (CSV) is a compelling purchase, as a hedge for the future

June Edition

Overview:

Carriage Services Inc (NYSE: CSV) is a leading provider of funeral and cemetery services in the United States. Founded in 1991, Carriage Services operates a network of funeral homes, cemeteries, and related businesses across the US.

The company's operations span multiple states, providing geographic diversification and reducing exposure to regional economic fluctuations. This diversification strategy can mitigate risks associated with localized economic challenges.

Because this industry is recession-resistant, Carriage will always have demand for their products and services. ***Customers for their services will want to see their loved ones taken care of after their passing. Furthermore, as Baby Boomers, America’s largest generation, continue to pass away, demand for CSV products and services will remain steady.

Carriage Services has a history of actively acquiring funeral homes and cemeteries. By consolidating smaller independent businesses under its brand, the company achieves economies of scale, and improving its market share. Investors should be attracted to Carriage Service’s growth strategy through their acquisitions.

Financials and dividend information :

CSV carries a PE (price to earnings) of 12.60 and a beta of 0.81. They have an all-time gain of 92%. Since 2014, their revenue has grown at a CAGR (compounded annual growth rate) of 7.32% on average. Their earnings per share stand at $2.20 (TTM) (as of June 16, 2023). All of this data shows their business and company is growing nicely. Furthermore, per CSV employee represents ~$346,280 of their revenue. (Source: https://www.zippia.com/carriage-services-careers-2092/revenue/).

The security also shows very solid dividend growth for a small-cap stock. The current yield is ~1.6%, which leaves lots of opportunities to grow. CSV carries a ~20% payout ratio with a 2.86% CAGR dividend growth. Although the dividend growth is lackluster at times, the company does boost the dividend roughly every two years, according to the graph below. You can see the company has increased the dividend at times ranging from 15%-50%. The company does pay out its dividends consistently but does not increase dividends annually consistently.

As the Baby Boomer generation reaches older ages, demand for funeral and cemetery services is inevitable. Carriage Services is well-positioned to capitalize on this demographic trend, potentially driving long-term growth.

Valuation:

In my calculations to determine its potential intrinsic value, I applied a conservative 5% growth to my calculator, considering the average is 7.3%. I also applied a conservative 7.5 PE with no growth for the calculator, the normal being 8. With those numbers and plugging in the EPS, I get a valuation of ~$35.94. Allowing for a potential 24% upside and a max buy price of $31.05. CSV is currently trading at ~$27.66 (as of June 16). Furthermore, Stock Analysis gives CSV a valuation of $44, and Yahoo Finance values the stock at $43.75. This shows a definite upside with this stock, especially since it found its bottom at the base of ~$23.

Outlook and conclusion:

In a letter to shareholders, CSV outlined plans to grow their revenue to $750 million by 2030 and moving the EBITDA margin from 30 to 32%. They plan to do this by achieving a 4.0-4.5 leverage ratio and acquiring many more partners for their business.

I find CSV to be a compelling option for a potential investment as they are expanding, and growing their revenue/EPS. It also offers a boring business that will expand over the decades. They are also pretty cheap in terms of PE, which is attractive to lots of investors. Furthermore, this asset is a more long-term investment compared to other stocks. You should be aware that this business will grow slowly over the next decade-plus. Those investing in this stock should have a vision that aligns with the timeline and a willingness to accept the company’s slower-paced growth strategy. Additionally, Carriage can provide a strong defensive stock for your portfolio with a great management team that is eager to grow in the next decade. Combining all of that data with the company’s nice dividend that often gets bumped, and a bright upside with intrinsic value; I find CSV to be a great fit for many portfolios.

- EBS

EBS Invest’s portfolio performance // Jan 2023 - June 23

I have recently uploaded a video detailing how my investments have progressed halfway through the year! Please watch below:

Stock purchases and dividends post video:

Purchases:

• CSV - 5 Shares

• SCHX - 2 Shares

• SCHD - 1 Shares

• CNI - 1 Share

• TROW - $60

• TGT - $27.50

• JNJ - $27.50

• QCOM - $27.50

• SCHW - $27.50

• BRK.B - $10

Dividends:

• IBM - $35.75

• SWVXX - $12.58

• JNJ - $1.38

• MSFT - $1.06

• TGT - $0.92

  Monthly Total for June (as of June 18th): $51.69

  YTD Total: $151.17

Helpful videos and links:

Have a question or comment? Email me:

[email protected]

//See you in the next edition

EBS Invests 2023//

NOT A FINANCIAL ADVISOR.

***The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on our site constitutes a solicitation, recommendation, endorsement, or offer by EBS Invests (Investments) or any third party provided to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such sonication or offer would be unlawful under the securities laws or such jurisdiction.

There are risks associated with investing in securities. Investing in stocks, bonds, ETFs, mutual funds all involve a risk of loss. ***