The method for cash conversion calculation is shown at the top of the chart, cash flow less capital expenditure dividend by EBITDA. As shown, Service Corporation International (NYSE:SCI) is the most cash generative company, converting around half of its EBITDA into free cash flow. StoneMor Partners L.P. (NYSE:STON) achieves the worst ratio and Carriage Services, Inc. (NYSE:CSV) once again sits in the middle.
So, overall based on key ratios concerning profitability and efficiency, it would appear that Service has used its size to its advantage and stands out above the rest of the group.
Based on key business metrics, Service Corporation International (NYSE:SCI) is the best deathcare company but what about future growth? Well it would appear that Carriage Services, Inc. (NYSE:CSV) is set for the fastest growth this year as EPS are set to grow around 60% followed by 18% in 2014. Unfortunately, StoneMor Partners L.P. (NYSE:STON) is not forecast to generate positive EPS for the next two years, mainly due to its MLP structure. That said, the company’s sales are set to grind slowly higher than, but not as fast as the growth at either Service or Carriage Services, Inc. (NYSE:CSV).
|Company||EPS 2013||Growth||EPS 2014||Growth|
|Stonemor||$253 (Sales millions)||5%||$267 (Sales millions)||6%|
Deathcare, as an industry, does not need much explanation or analysis of its future outlook. The industry has been, and always will be, in demand. However, as with every industry, only the best companies will survive, and it would appear, that in this case at least, Service is the biggest company that is achieving the best returns for investors with the best cash conversion ratio, strongest return on equity and steady rate of growth.
Having said that, one factor that I have not mentioned is cash return, or dividends. Stonemor, as a partnership, offers investors the best payout of $2.38 per share, which is a yield of 9.3% at current levels. Meanwhile, Carriage and Service only offer dividend yields of 0.5% and 1.5% respectively. So, income investors could consider Stonemor, while growth investors should look to Service Corp..
Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool recommends StoneMor Partners. The Motley Fool owns shares of StoneMor Partners. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Which Deathcare Company is the Best Investment? originally appeared on Fool.com is written by Rupert Hargreaves.
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