Intrinsic value of Carriage Services - CSV

Previous Close

$23.92

  Intrinsic Value

$37.79

stock screener

  Rating & Target

str. buy

+58%

  Value-price divergence*

-29%

Previous close

$23.92

 
Intrinsic value

$37.79

 
Up/down potential

+58%

 
Rating

str. buy

 
Value-price divergence*

-29%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CSV stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.06
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
Revenue, $m
  248
  268
  288
  309
  331
  354
  378
  402
  428
  455
  483
  512
  542
  574
  606
  641
  677
  714
  753
  794
  837
  882
  929
  978
  1,029
  1,083
  1,140
  1,199
  1,261
  1,326
  1,394
Variable operating expenses, $m
 
  211
  225
  240
  255
  271
  287
  304
  322
  340
  359
  352
  372
  394
  417
  440
  465
  491
  518
  546
  575
  606
  638
  672
  707
  744
  783
  824
  866
  911
  958
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  199
  211
  225
  240
  255
  271
  287
  304
  322
  340
  359
  352
  372
  394
  417
  440
  465
  491
  518
  546
  575
  606
  638
  672
  707
  744
  783
  824
  866
  911
  958
Operating income, $m
  50
  56
  63
  69
  76
  83
  91
  98
  106
  115
  124
  160
  170
  179
  190
  200
  212
  223
  236
  249
  262
  276
  291
  306
  322
  339
  357
  375
  394
  415
  436
EBITDA, $m
  65
  95
  102
  110
  118
  126
  134
  143
  152
  161
  171
  182
  192
  204
  215
  227
  240
  254
  267
  282
  297
  313
  330
  347
  365
  385
  405
  426
  448
  471
  495
Interest expense (income), $m
  10
  12
  14
  16
  18
  20
  22
  25
  27
  30
  32
  35
  38
  41
  44
  47
  51
  54
  58
  62
  66
  70
  75
  79
  84
  89
  95
  100
  106
  112
  119
Earnings before tax, $m
  32
  44
  49
  53
  58
  63
  68
  74
  79
  85
  91
  125
  132
  138
  146
  153
  161
  169
  178
  186
  196
  206
  216
  226
  238
  249
  262
  275
  288
  302
  317
Tax expense, $m
  12
  12
  13
  14
  16
  17
  18
  20
  21
  23
  25
  34
  36
  37
  39
  41
  43
  46
  48
  50
  53
  56
  58
  61
  64
  67
  71
  74
  78
  82
  86
Net income, $m
  20
  32
  36
  39
  43
  46
  50
  54
  58
  62
  67
  91
  96
  101
  106
  112
  117
  123
  130
  136
  143
  150
  158
  165
  174
  182
  191
  200
  210
  221
  232

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  885
  952
  1,025
  1,100
  1,178
  1,260
  1,344
  1,432
  1,524
  1,619
  1,718
  1,821
  1,929
  2,041
  2,158
  2,280
  2,408
  2,541
  2,681
  2,826
  2,979
  3,138
  3,305
  3,480
  3,663
  3,854
  4,055
  4,266
  4,486
  4,717
  4,959
Adjusted assets (=assets-cash), $m
  882
  952
  1,025
  1,100
  1,178
  1,260
  1,344
  1,432
  1,524
  1,619
  1,718
  1,821
  1,929
  2,041
  2,158
  2,280
  2,408
  2,541
  2,681
  2,826
  2,979
  3,138
  3,305
  3,480
  3,663
  3,854
  4,055
  4,266
  4,486
  4,717
  4,959
Revenue / Adjusted assets
  0.281
  0.282
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
  0.281
Average production assets, $m
  314
  338
  364
  391
  419
  447
  477
  509
  541
  575
  610
  647
  685
  725
  767
  810
  855
  903
  952
  1,004
  1,058
  1,115
  1,174
  1,236
  1,301
  1,369
  1,440
  1,515
  1,593
  1,675
  1,761
Working capital, $m
  -11
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
Total debt, $m
  340
  393
  451
  511
  573
  638
  706
  776
  849
  925
  1,004
  1,086
  1,172
  1,262
  1,355
  1,453
  1,555
  1,661
  1,772
  1,889
  2,010
  2,137
  2,271
  2,410
  2,556
  2,709
  2,869
  3,037
  3,213
  3,397
  3,591
Total liabilities, $m
  707
  760
  818
  878
  940
  1,005
  1,073
  1,143
  1,216
  1,292
  1,371
  1,453
  1,539
  1,629
  1,722
  1,820
  1,922
  2,028
  2,139
  2,256
  2,377
  2,504
  2,638
  2,777
  2,923
  3,076
  3,236
  3,404
  3,580
  3,764
  3,958
Total equity, $m
  178
  192
  207
  222
  238
  254
  272
  289
  308
  327
  347
  368
  390
  412
  436
  461
  486
  513
  542
  571
  602
  634
  668
  703
  740
  779
  819
  862
  906
  953
  1,002
Total liabilities and equity, $m
  885
  952
  1,025
  1,100
  1,178
  1,259
  1,345
  1,432
  1,524
  1,619
  1,718
  1,821
  1,929
  2,041
  2,158
  2,281
  2,408
  2,541
  2,681
  2,827
  2,979
  3,138
  3,306
  3,480
  3,663
  3,855
  4,055
  4,266
  4,486
  4,717
  4,960
Debt-to-equity ratio
  1.910
  2.040
  2.180
  2.300
  2.410
  2.510
  2.600
  2.680
  2.760
  2.830
  2.890
  2.950
  3.010
  3.060
  3.110
  3.150
  3.200
  3.240
  3.270
  3.310
  3.340
  3.370
  3.400
  3.430
  3.450
  3.480
  3.500
  3.520
  3.550
  3.570
  3.580
Adjusted equity ratio
  0.198
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202
  0.202

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  20
  32
  36
  39
  43
  46
  50
  54
  58
  62
  67
  91
  96
  101
  106
  112
  117
  123
  130
  136
  143
  150
  158
  165
  174
  182
  191
  200
  210
  221
  232
Depreciation, amort., depletion, $m
  15
  39
  40
  41
  41
  42
  43
  44
  46
  47
  48
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  46
  48
  51
  53
  56
  59
Funds from operations, $m
  46
  71
  75
  80
  84
  89
  93
  98
  103
  109
  114
  113
  119
  125
  132
  139
  146
  153
  161
  170
  178
  187
  197
  207
  217
  228
  239
  251
  263
  277
  290
Change in working capital, $m
  -3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from operations, $m
  49
  71
  75
  80
  84
  89
  93
  98
  104
  109
  115
  113
  119
  125
  132
  139
  146
  154
  162
  170
  178
  187
  197
  207
  217
  228
  239
  251
  264
  277
  290
Maintenance CAPEX, $m
  0
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
New CAPEX, $m
  -23
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
Cash from investing activities, $m
  -45
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -84
  -87
  -92
  -96
  -101
  -106
  -111
  -117
  -123
  -129
  -135
  -142
Free cash flow, $m
  4
  36
  38
  41
  43
  46
  48
  51
  54
  57
  60
  56
  59
  63
  66
  70
  74
  78
  82
  86
  91
  95
  100
  106
  111
  117
  122
  128
  135
  142
  149
Issuance/(repayment) of debt, $m
  1
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  90
  93
  98
  102
  106
  111
  116
  122
  127
  133
  139
  146
  153
  160
  168
  176
  184
  193
Issuance/(repurchase) of shares, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1
  56
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  90
  93
  98
  102
  106
  111
  116
  122
  127
  133
  139
  146
  153
  160
  168
  176
  184
  193
Total cash flow (excl. dividends), $m
  5
  92
  96
  101
  106
  111
  116
  121
  127
  133
  139
  138
  145
  152
  160
  167
  176
  184
  193
  203
  212
  223
  234
  245
  257
  269
  283
  296
  311
  326
  342
Retained Cash Flow (-), $m
  -20
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -42
  -45
  -47
  -49
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  78
  82
  86
  90
  94
  99
  104
  109
  114
  119
  117
  123
  130
  136
  143
  150
  157
  165
  173
  182
  191
  200
  210
  220
  231
  242
  254
  266
  279
  293
Discount rate, %
 
  9.80
  10.29
  10.80
  11.34
  11.91
  12.51
  13.13
  13.79
  14.48
  15.20
  15.96
  16.76
  17.60
  18.48
  19.40
  20.37
  21.39
  22.46
  23.58
  24.76
  26.00
  27.30
  28.67
  30.10
  31.61
  33.19
  34.85
  36.59
  38.42
  40.34
PV of cash for distribution, $m
 
  71
  67
  63
  58
  54
  49
  44
  39
  34
  29
  23
  19
  16
  13
  10
  8
  6
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Carriage Services, Inc. provides funeral and cemetery services and merchandise in the United States. It operates through two segments, Funeral Home Operations and Cemetery Operations. The Funeral Home Operations segment offers burial, cremation, consultation, and transportation services; removes and prepares remains; sells caskets, urns, and related funeral merchandise; and enables the use of funeral home facilities for visitation and services. The Cemetery Operations segment provides products and services, such as interment services; the rights to interment in cemetery sites comprising grave sites, mausoleum crypts, and niches; and related cemetery merchandise, including memorials and vaults. As of December 31, 2016, the company operated 170 funeral homes in 28 states; and 32 cemeteries in 11 states. Carriage Services, Inc. was founded in 1991 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Carriage Services (CSV)

Valuation Ratios
P/E Ratio 19.9
Price to Sales 1.6
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 8.1
Price to Free Cash Flow 15.3
Growth Rates
Sales Growth Rate 2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.1%
Cap. Spend. - 3 Yr. Gr. Rate 15.9%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 183.7%
Total Debt to Equity 191%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.1%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 4%
Return On Equity 11.9%
Return On Equity - 3 Yr. Avg. 11.3%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 32.3%
Gross Margin - 3 Yr. Avg. 31.8%
EBITDA Margin 23%
EBITDA Margin - 3 Yr. Avg. 22.5%
Operating Margin 19.8%
Oper. Margin - 3 Yr. Avg. 18.5%
Pre-Tax Margin 12.9%
Pre-Tax Margin - 3 Yr. Avg. 12.5%
Net Profit Margin 8.1%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate 37.5%
Eff/ Tax Rate - 3 Yr. Avg. 37.4%
Payout Ratio 10%

CSV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CSV stock intrinsic value calculation we used $248 million for the last fiscal year's total revenue generated by Carriage Services. The default revenue input number comes from 2016 income statement of Carriage Services. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CSV stock valuation model: a) initial revenue growth rate of 7.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.8%, whose default value for CSV is calculated based on our internal credit rating of Carriage Services, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Carriage Services.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CSV stock the variable cost ratio is equal to 79.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CSV stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Carriage Services.

Corporate tax rate of 27% is the nominal tax rate for Carriage Services. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CSV stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CSV are equal to 126.4%.

Life of production assets of 38.9 years is the average useful life of capital assets used in Carriage Services operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CSV is equal to -0.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $178 million for Carriage Services - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 16.257 million for Carriage Services is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Carriage Services at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ Carriage Services Declares Quarterly Cash Dividend   [Jul-27-17 04:15PM  PR Newswire]
▶ Carriage Services posts 2Q profit   [Jul-26-17 11:39PM  Associated Press]
▶ Mortality Provides Opportunity for Investors   [May-02-17 04:50PM  GuruFocus.com]
▶ Carriage Services Declares Quarterly Cash Dividend   [Apr-27-17 04:15PM  PR Newswire]
▶ Carriage Services posts 1Q profit   [Apr-26-17 06:48PM  Associated Press]
▶ New Strong Sell Stocks for February 28th   [Feb-28-17 10:12AM  Zacks]
▶ Carriage Services posts 4Q profit   [Feb-15-17 06:44PM  Associated Press]
▶ Carriage Services Declares Quarterly Cash Dividend   [Jan-26-17 04:30PM  PR Newswire]
▶ Carriage Services Declares Quarterly Cash Dividend   [Oct-27-16 04:57PM  PR Newswire]
▶ Carriage Services Declares Quarterly Cash Dividend   [Aug-01-16 07:00AM  PR Newswire]
Stock chart of CSV Financial statements of CSV
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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