Intrinsic value of Carriage Services - CSV

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$24.73

  Intrinsic Value

$24.72

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  Rating & Target

hold

-0%

Previous close

$24.73

 
Intrinsic value

$24.72

 
Up/down potential

-0%

 
Rating

hold

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
Revenue, $m
  248
  268
  279
  291
  303
  317
  331
  345
  361
  377
  395
  413
  433
  453
  475
  497
  521
  546
  572
  600
  629
  660
  692
  726
  762
  800
  839
  880
  924
  970
  1,018
Variable operating expenses, $m
 
  213
  220
  228
  237
  246
  255
  265
  276
  287
  299
  281
  294
  308
  322
  338
  354
  371
  389
  408
  428
  449
  470
  494
  518
  543
  570
  598
  628
  659
  691
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
  213
  220
  228
  237
  246
  255
  265
  276
  287
  299
  281
  294
  308
  322
  338
  354
  371
  389
  408
  428
  449
  470
  494
  518
  543
  570
  598
  628
  659
  691
Operating income, $m
  50
  55
  59
  63
  67
  71
  75
  80
  85
  90
  96
  132
  139
  145
  152
  159
  167
  175
  184
  192
  202
  212
  222
  233
  244
  256
  269
  282
  296
  311
  326
EBITDA, $m
  65
  150
  156
  163
  170
  177
  185
  193
  202
  211
  221
  231
  242
  253
  265
  278
  291
  305
  320
  336
  352
  369
  387
  406
  426
  447
  469
  492
  517
  542
  569
Interest expense (income), $m
  10
  19
  21
  23
  24
  26
  28
  30
  33
  35
  38
  40
  43
  46
  49
  52
  56
  59
  63
  67
  71
  76
  80
  85
  90
  96
  102
  108
  114
  120
  127
Earnings before tax, $m
  32
  36
  38
  40
  42
  45
  47
  50
  52
  55
  58
  92
  96
  99
  103
  107
  111
  116
  120
  125
  130
  136
  142
  148
  154
  160
  167
  175
  182
  190
  199
Tax expense, $m
  12
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  25
  26
  27
  28
  29
  30
  31
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  49
  51
  54
Net income, $m
  20
  26
  28
  29
  31
  33
  34
  36
  38
  40
  43
  67
  70
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  108
  112
  117
  122
  128
  133
  139
  145

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
  958
  998
  1,039
  1,084
  1,131
  1,181
  1,233
  1,289
  1,348
  1,410
  1,476
  1,545
  1,618
  1,695
  1,776
  1,861
  1,950
  2,045
  2,144
  2,248
  2,358
  2,473
  2,594
  2,722
  2,856
  2,996
  3,144
  3,300
  3,463
  3,634
Adjusted assets (=assets-cash), $m
  882
  958
  998
  1,039
  1,084
  1,131
  1,181
  1,233
  1,289
  1,348
  1,410
  1,476
  1,545
  1,618
  1,695
  1,776
  1,861
  1,950
  2,045
  2,144
  2,248
  2,358
  2,473
  2,594
  2,722
  2,856
  2,996
  3,144
  3,300
  3,463
  3,634
Revenue / Adjusted assets
  0.281
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
Average production assets, $m
  314
  640
  666
  694
  724
  755
  788
  824
  861
  900
  942
  986
  1,032
  1,080
  1,132
  1,186
  1,243
  1,302
  1,365
  1,432
  1,501
  1,575
  1,652
  1,732
  1,818
  1,907
  2,001
  2,100
  2,203
  2,312
  2,427
Working capital, $m
  -11
  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 debt, $m
  340
  390
  421
  454
  489
  526
  565
  606
  650
  696
  745
  797
  851
  908
  969
  1,032
  1,099
  1,170
  1,244
  1,322
  1,404
  1,490
  1,581
  1,676
  1,776
  1,881
  1,992
  2,108
  2,230
  2,358
  2,493
Total liabilities, $m
  709
  753
  784
  817
  852
  889
  928
  970
  1,013
  1,060
  1,109
  1,160
  1,214
  1,272
  1,332
  1,396
  1,463
  1,533
  1,607
  1,685
  1,767
  1,853
  1,944
  2,039
  2,139
  2,245
  2,355
  2,471
  2,593
  2,722
  2,857
Total equity, $m
  176
  205
  213
  222
  232
  242
  253
  264
  276
  289
  302
  316
  331
  346
  363
  380
  398
  417
  438
  459
  481
  505
  529
  555
  582
  611
  641
  673
  706
  741
  778
Total liabilities and equity, $m
  885
  958
  997
  1,039
  1,084
  1,131
  1,181
  1,234
  1,289
  1,349
  1,411
  1,476
  1,545
  1,618
  1,695
  1,776
  1,861
  1,950
  2,045
  2,144
  2,248
  2,358
  2,473
  2,594
  2,721
  2,856
  2,996
  3,144
  3,299
  3,463
  3,635
Debt-to-equity ratio
  1.932
  1.900
  1.970
  2.040
  2.110
  2.170
  2.230
  2.300
  2.360
  2.410
  2.470
  2.520
  2.570
  2.620
  2.670
  2.720
  2.760
  2.800
  2.840
  2.880
  2.920
  2.950
  2.990
  3.020
  3.050
  3.080
  3.110
  3.130
  3.160
  3.180
  3.210
Adjusted equity ratio
  0.196
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214
  0.214

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  20
  26
  28
  29
  31
  33
  34
  36
  38
  40
  43
  67
  70
  72
  75
  78
  81
  84
  88
  91
  95
  99
  103
  108
  112
  117
  122
  128
  133
  139
  145
Depreciation, amort., depletion, $m
  15
  95
  97
  100
  103
  106
  109
  113
  117
  121
  125
  99
  103
  108
  113
  119
  124
  130
  137
  143
  150
  157
  165
  173
  182
  191
  200
  210
  220
  231
  243
Funds from operations, $m
  46
  121
  125
  129
  134
  139
  144
  149
  155
  161
  167
  166
  173
  181
  188
  197
  206
  215
  224
  235
  245
  257
  268
  281
  294
  308
  322
  338
  353
  370
  388
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
  121
  125
  129
  134
  139
  144
  149
  155
  161
  167
  166
  173
  181
  188
  197
  206
  215
  224
  235
  245
  257
  268
  281
  294
  308
  322
  338
  353
  370
  388
Maintenance CAPEX, $m
  0
  -62
  -64
  -67
  -69
  -72
  -76
  -79
  -82
  -86
  -90
  -94
  -99
  -103
  -108
  -113
  -119
  -124
  -130
  -137
  -143
  -150
  -157
  -165
  -173
  -182
  -191
  -200
  -210
  -220
  -231
New CAPEX, $m
  -23
  -24
  -26
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -42
  -44
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -66
  -70
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -115
Cash from investing activities, $m
  -45
  -86
  -90
  -95
  -99
  -103
  -109
  -114
  -119
  -125
  -132
  -138
  -145
  -152
  -159
  -167
  -176
  -184
  -193
  -203
  -213
  -223
  -234
  -246
  -258
  -271
  -285
  -299
  -314
  -329
  -346
Free cash flow, $m
  4
  35
  35
  35
  35
  35
  35
  35
  35
  36
  36
  28
  28
  29
  29
  30
  30
  31
  31
  32
  33
  33
  34
  35
  36
  37
  38
  39
  40
  41
  42
Issuance/(repayment) of debt, $m
  1
  30
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  54
  57
  60
  64
  67
  70
  74
  78
  82
  86
  91
  95
  100
  105
  111
  116
  122
  128
  135
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
  30
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  54
  57
  60
  64
  67
  70
  74
  78
  82
  86
  91
  95
  100
  105
  111
  116
  122
  128
  135
Total cash flow (excl. dividends), $m
  5
  65
  66
  68
  70
  72
  74
  77
  79
  82
  85
  79
  83
  86
  89
  93
  97
  101
  105
  110
  115
  119
  125
  130
  136
  142
  148
  155
  162
  169
  177
Retained Cash Flow (-), $m
  -18
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
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
 
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
Cash available for distribution, $m
 
  58
  57
  59
  60
  62
  63
  65
  67
  69
  71
  65
  68
  70
  73
  76
  79
  82
  85
  89
  92
  96
  100
  104
  109
  113
  118
  123
  129
  134
  140
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
 
  52
  47
  43
  39
  35
  31
  28
  24
  21
  17
  13
  11
  9
  7
  5
  4
  3
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
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Carriage Services, Inc. is a provider of death care services and merchandise in the United States. The Company operates in two business segments: Funeral Home Operations and Cemetery Operations. The Funeral Homes segment provides funeral services (traditional burial and cremation) and sells related merchandise, such as caskets and urns. Its cemetery products and services include interment services, the rights to interment in cemetery sites and related cemetery merchandise, such as memorials and vaults. It serves suburban and rural markets. It provides funeral and cemetery services and products on both at-need (time of death) and preneed (planned prior to death) basis. It also maintains trusts in connection with funeral home and cemetery operations, including preneed funeral trusts, preneed cemetery merchandise and service trusts and cemetery perpetual care trusts. The Company operates 174 funeral homes in 29 states and 32 cemeteries in 11 states.

FINANCIAL RATIOS  of  Carriage Services (CSV)

Valuation Ratios
P/E Ratio 20.6
Price to Sales 1.7
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 8.4
Price to Free Cash Flow 15.8
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 185.8%
Total Debt to Equity 193.2%
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. 4.1%
Return On Equity 12%
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 $258 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 4% 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 5.4% 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 1.2%.

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 238.5%.

Life of production assets of 10 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%. 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 - $198 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 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
SCI Service Intern 37.48 25.76  sell
STON StoneMor Partn 3.57 5.04  hold
MATW Matthews Inter 58.60 40.65  hold

COMPANY NEWS

▶ Carriage Services Declares Quarterly Cash Dividend   [Apr-26-18 04:30PM  GlobeNewswire]
▶ Carriage Services Inc. to Host Earnings Call   [Apr-25-18 07:45AM  ACCESSWIRE]
▶ Carriage Services: 1Q Earnings Snapshot   [Apr-24-18 05:17PM  Associated Press]
▶ What Makes Dean Foods (DF) a Strong Sell?   [Apr-04-18 08:49AM  Zacks]
▶ Carriage Services Inc. to Host Earnings Call   [Feb-15-18 08:10AM  ACCESSWIRE]
▶ Carriage Services posts 4Q profit   [Feb-14-18 06:13PM  Associated Press]
▶ Carriage Declares Quarterly Cash Dividend   [Jan-25-18 04:20PM  PR Newswire]
▶ Houston funeral home company enters Colorado market   [Nov-10-17 01:10PM  American City Business Journals]
▶ Carriage Services Inc. to Host Earnings Call   [Oct-26-17 08:10AM  ACCESSWIRE]
▶ Carriage Services posts 3Q profit   [05:03AM  Associated Press]
▶ 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]
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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