I recently had the pleasure of celebrating the 100th birthday of
my Grandmother back home in Cleveland, OH. She has been in a care
facility for the last 8 years and that has dramatically improved
her health and probably extended her life. This all made me think
of the relative future, and the aging baby boomer population.
Just prior to leaving for home, I was informed by my coworker
@TraceyRyniec that there was an start up dot com business from
Cleveland that was getting press in another publication. After
being on the site for just a few moments, a IM message was asking
me if I needed help... I was looking to meet up with the founder
and low and behold it was one of them on the IM. We set up a time
to talk when I was home.
eFuneral, based in Cleveland OH is providing a service to people
that are really struggling at the time. Loss of family or a friend
is rarely if ever fully expected, so pulling it all together to
arrange a funeral and all that comes with it can be difficult.
Prepping for it can make the process much easier, especially to
those of us who do not want to waste time and money.
Over coffee I spoke with Mike Belsito and we talked about start ups
and I shared some experiences from when I was working for a private
equity firm investing in dot coms. Mike shared some of this
marketing ideas with me and I heard a few normally highly Zacks
Ranked Companies.
Funeral Services
Service Corp
(
SCI
) was one of the names that jumped right to mind. As a Zacks #2
Rank (Buy) stock, we know that the earnings estimates are going to
be trending higher. I also see that the company has a great history
of beating the number and providing a positive earnings surprise.
In fact, the company has 7 beats in its last 8 reports and the
other report was an earnings meet.
Estimates for SCI have been moving higher over the last year. The
Zacks 2012 earnings estimate climbed 10% throughout the year,
moving from $0.70 in January to the current level of $0.77. The
2013 estimate has risen from $0.76 to $0.82 over the same time
period.
being the 800 lb. gorilla in the space its valuation metrics tend
to skew the industry average. The stock is trading at 18x trailing
twelve months earnings, which is higher than the 16x industry
average. The forward PE is also showing a slight premium to the
industry average. Where things tend to level off, is the more
conservative measure of price to book (2.1x for SCI vs 3.8x
industry average) and price to sales (1.2x for both SCI and the
industry average).
Stewart Enterprises
Another funeral service provider is Zacks #3 Rank (Hold)
Stewart Enterprises
(
STEI
). This stock has slipped to a #3 recently, but has held a #1
(Strong Buy) or a #2 (Buy) rank throughout most of the year.
The company has topped the Zacks Consensus Estimate in each of the
last two quarters posting beats of 44% and 22%. Prior to those
beats the company had missed in each of the last four quarters.
Estimates have moved around quite a bit for 2012. The year started
with a $0.43 estimate and number had slid to $0.39 in May, but has
since recovered to the current level of $0.44. The picture for 2013
was much better, with estimates starting the year at $0.48 and
moved to $0.49 in May and currently stand at $0.51.
STEI trades mostly in line with the industry averages. The 16.6x
trailing PE is slightly higher than the 16x industry average while
the forward PE of 14x is at a slight discount to the 14.6x industry
average. Price to book of 1.4x is well below the 3.8x industry
average and like SCI, STEI trades in line with the industry average
for price to sales at 1.2x
Both of these companies could see margin pressure from the likes of
eFuneral or other information providers. eFuneral surveyed over
1,000 funeral homes in 11 different metropolitan markets throughout
the US. Based on that research, they have created the eFuneral
Price Index to act as a market specific guide on funeral costs in
that market. Over a dozen line item costs are covered - along with
averages and ranges. You can find the report on the eFuneral
website (
http://efuneral.com/efuneral-price-index-reports-released-to-better-understand-funeral-costs/
).
Long Term Care
Another name that Mike talked about marketing to, hoping to help
prepare families for the inevitable was in the longer term care
space.
The Ensign Group
(
ENSG
) falls into that space and currently carries a Zacks #2 (Buy)
rank. eFuneral is not seen as a competitor to ENSG, but looks to
get some potential clients from long term care providers.
Its recent earnings report was a beat, and while it was a positive
earnings surprise, investors were not really stunned by that
development. It marked the 11th straight positive earnings surprise
by the company, but since the surprise was only a penny, or 1.6%
compared to the previous quarter which saw an $0.08 or 13.5%
surprise, the stock fell 5% in the session following the release.
Estimates have moved higher for ENSG throughout the year, starting
at $2.15 and rising to $2.51 at the current time for 2012. The same
could be said of 2013, with estimates moving from $2.34 to $2.69.
The valuation picture for ENSG is a good one, with the company
trading at attractive levels. The trailing PE of 11.4x is lower
than the 12.9x industry average, and the forward PE carries a
similar discount. The price to book multiple of 1.8x is in line
with the industry average. The price to sales multiple of 0.7x is
the only indication of a premium valuation, as the industry average
is a low 0.4x.
Being prepared for the inevitable is my Mom's job for my
Grandmother. But I can help my mother with eFuneral. No doubt that
as the site grows and offers new services it will be even more
useful to millions of people.
In that same vein, being a prepared investor can help prevent
massive losses by following the Zacks Rank and paying close
attention to where the competition is coming from.
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Brian Bolan is a Stock Strategist for Zacks.com. He is the
Editor in charge of the
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ENSIGN GROUP (ENSG): Free Stock Analysis Report
ENSIGN GROUP (ENSG): Free Stock Analysis Report
SERVICE CORP IN (SCI): Free Stock Analysis
Report
SERVICE CORP IN (SCI): Free Stock Analysis
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STEWART ENTRP A (STEI): Free Stock Analysis
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STEWART ENTRP A (STEI): Free Stock Analysis
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