SCI

We rate SERVICE CORP INTERNATIONAL (SCI) as a Hold with a composite score of 54.7/100 at a current price of $80.61. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (94th percentile) and momentum (69th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (42/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

SERVICE CORP INTERNATIONAL holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 54.7/100 places it at rank #1315 in our full 7,333-stock universe. With a $23.4B market capitalization, SERVICE CORP INTERNATIONAL operates at meaningful scale within the Services sector, providing competitive advantages in distribution, procurement, and customer reach.

The outlook is moderately positive, with revenue expanding at 2% and favorable momentum (69th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 26% (-33.9pp vs sector) narrow to operating margins of 22% (+18.2pp vs sector) and net margins of 11.9%, yielding a gross-to-net conversion rate of 46%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $80.61, SERVICE CORP INTERNATIONAL is trading near fair value based on current fundamentals. Our value factor score of 54/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 22.0x (roughly in line with the sector median of 23.7x), EV/EBITDA of 17.7x (at a premium), P/B of 6.7x, P/S of 2.6x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to SERVICE CORP INTERNATIONAL. The stock presents a balanced risk profile: significant leverage (314% debt-to-equity) and low beta of 0.27 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (314% debt-to-equity); low beta of 0.27 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 94th percentile and quality factor at the 49th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (94th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate SERVICE CORP INTERNATIONAL's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 30.6%, and the balance sheet is managed within acceptable parameters (D/E: 314%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; SERVICE CORP INTERNATIONAL falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 1.51% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, SERVICE CORP INTERNATIONAL receives a Hold rating with a composite score of 54.7/100 (rank #1315 of 7,333). Our quantitative framework assigns a Narrow Moat (42/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 63/100.

Our analysis supports a neutral stance on SERVICE CORP INTERNATIONAL. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.