Carriage Services (CSV)

Funeral services company Carriage Services (NYSE:CSV) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 3.5% year on year to $107.1 million. On the other hand, the company’s full-year revenue guidance of $405 million at the midpoint came in 0.9% below analysts’ estimates. Its non-GAAP profit of $0.96 per share was 14.3% above analysts’ consensus estimates.

Company Overview

Established in 1991, Carriage Services (NYSE:CSV) is a provider of funeral and cemetery services in the United States.

Some consumer discretionary companies don’t fall neatly into a category because their products or services are unique. Although their offerings may be niche, these companies have often found more efficient or technology-enabled ways of doing or selling something that has existed for a while. Technology can be a double-edged sword, though, as it may lower the barriers to entry for new competitors and allow them to do serve customers better.

Carriage Services' primary competitors include Service Corporation International (NYSE:SCI), StoneMor (NYSE:STON), Park Lawn Corporation (TSX:PLC), Matthews International (NASDAQ:MATW), and Dignity Plc (LSE:DTY).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Carriage Services’s 7.6% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the consumer discretionary sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Carriage Services’s recent performance shows its demand has slowed as its annualized revenue growth of 5.3% over the last two years was below its five-year trend.

This quarter, Carriage Services reported modest year-on-year revenue growth of 3.5% but beat Wall Street’s estimates by 2.8%.

We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates.

Carriage Services’s operating margin has risen over the last 12 months and averaged 22.2% over the last two years. On top of that, its profitability was elite for a consumer discretionary business thanks to its efficient cost structure and economies of scale.

This quarter, Carriage Services generated an operating profit margin of 29.5%, up 9.2 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Carriage Services’s EPS grew at a remarkable 18.5% compounded annual growth rate over the last five years, higher than its 7.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q1, Carriage Services reported EPS at $0.96, up from $0.75 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Carriage Services has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 13.6% over the last two years, better than the broader consumer discretionary sector.

Carriage Services’s free cash flow clocked in at $13.4 million in Q1, equivalent to a 12.5% margin. The company’s cash profitability regressed as it was 7.7 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Carriage Services historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 10%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Carriage Services’s ROIC averaged 1.7 percentage point decreases over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Carriage Services reported $4.64 million of cash and $542 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $125.5 million of EBITDA over the last 12 months, we view Carriage Services’s 4.3× net-debt-to-EBITDA ratio as safe. We also see its $16.07 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Carriage Services beat analysts’ EPS expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance slightly missed. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The stock remained flat at $39.78 immediately following the results.

Updated: May 16, 2025 at 10:05 PM EDT

Before deciding whether to buy Carriage Services or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Carriage Services isn’t a bad business, but we have other favorites. Although its revenue growth was uninspiring over the last five years and analysts expect growth to slow over the next 12 months, its projected EPS for the next year implies the company’s fundamentals will improve. We advise investors to be cautious with this one, however, as its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Carriage Services’s EV-to-EBITDA ratio based on the next 12 months is 6.9x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $52 on the company (compared to the current share price of $43.85).

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

To get the best start with StockStory, check out our most recent stock picks, and then sign up for our earnings alerts by adding companies to your watchlist. We typically have quarterly earnings results analyzed within seconds of the data being released, giving investors the chance to react before the market has fully absorbed the information. This is especially true for companies reporting pre-market.