1. Carriage Services, Inc. Manik Malhotra Quintus Yang
18th April, 2017

2. AGENDA Stock Market Prospects Industry Overview and Analysis
Macroeconomic Overview and Drivers
Company Overview
Financial Analysis
Comparable Valuation
DCF Valuation
Technical Analysis
Recommendation

3. STOCK MARKET PROSPECTS INDUSTRY OVERVIEW MACROECONOMIC OVERVIEW COMPANY OVERVIEW

4. Stock Market Prospects
Share Price Performance
March 2012
March 2013
March 2014
March 2015
March 2016
March 2017
$7.55
$27.08
5-Year Return – 30%
Portfolio Weightage By Cost
Market Trading Multiples
Current Stock Price
$27.5
Market Capitalization
$454 million
Total Enterprise Value
$820 million
P/E Ratio
24.5x
52 Week Range
$21.7 –$29.1
Source: Google Finance:
As of 17th April 2017

5. Stock Market Prospects
Cumulative Returns since March 2012
Source: Google Finance:
As of 17th April 2017

6. Industry Overview Industry Major Players in Industry
Estimated to be a $18 billion industry
2.7 million deaths in an year currently
Average life expectancy in USA is 78.8 years
47.8 million Americans aged 65+
56.4 million Americans aged 65+ by 2020
65+ population growing at a faster rate than total population
Direct Competitors
Service Corporation International (SCI)
StoneMor Partners Limited (STON)
Indirect Competitors
Hillenbrand (HI)
Matthews International Corporation (MATW)
SCI, STON and CSV combined have a market share of 20%
Role of Heritage & Tradition
Role of Acquisition in Industry
Traditionally been a family-owned business built around local heritage
Runs on established client family relationships and related referrals
Relationships fostered at local level build trust and are a driver of market share
A lot of time and resources required to build local heritage and tradition
Mostly acquired companies name & management not changed
Carriage Services acquired 6 funeral home businesses in 2016
Service Corporation International as well as StoneMor also expand through acquisitions
Most of the funeral homes are independently owned
Some independent companies have also grown through acquisitions
Source: 10K reports

7. Macroeconomic Overview
Aging Population Trend (65+)
% Increase in Deaths per Year
% Change in Burial/Cremation Rate
Current Burial & Cremation Rate
Source: 10K reports
US Census Board

8. Company Overview Business Overview Financial Snapshot
Provider of Funeral and Cemetery services
Co-founded in 1991 in Houston, Texas
Publicly traded on NYSE under symbol “CSV” in 1993
Operates 170 funeral homes in 28 states & 32 cemeteries in 11 states
The mission statement of the company is “Being the Best”
Corporate strategy defined by three models
Standards Operating Model
4E Leadership Model
Strategic Acquisition Model
Geographic Presence
Investors
FMR LLC
13.0%
Dimensional Fund Advisors
8.3%
Melvin Payne (CEO)
8.2%
BlackRock
6.1%
Royal Bank of Canada
5.2%
Institutional Ownership
85.5%
Insider Ownership
8.9%
Source: 10K Reports

9. 10 Year Vision and Strategy
Company Overview
Products and Services
Ceremony and tribute, in the form of memorial service
Disposition of remains, either through burial or cremation
Memorialization, general through monuments, markers or inscriptions
10 Year Vision and Strategy
To be recognized by institutional investors and those in industry as a superior consolidation, operating and value creation investment platform
Affiliate with best remaining independently owned funeral and cemetery business
Source: Investor relation reports

10. SWOT Analysis Strengths Weakness Opportunities Threats
1) High performance, decentralized, partnership culture
2) Market leader in existing markets
3) Proven leadership team
Weakness
1) Highly fragmented industry
2) Dependence on economic conditions
3) Dependence on relationships
Opportunities
1) Growing death rates
2) New acquisitions
3) New markets
Threats
1) Increasing cremation rates
2) Growing competition
3) Price changes

11. FINACIAL ANALYSIS COMPARABLE ANALYSIS DCF VALUATION TECHNICAL ANALYSIS RECOMMENDATION

12. Historical Financial Results
Demonstrated ability to leverage single digit Revenue growth rates into larger increases in Adjusted Consolidated EBITDA and Adjusted Diluted Earnings Per Share.
Growth:
Revenue CAGR: 4.6%
Adj. Consolidated EBITDA CAGR: 6.7%
Adj. Diluted EPS CAGR: 15.7%
Source: Investor relation reports

13. Financial Analysis Profitability Ratio Efficiency Ratio
Liquidity Ratio
Solvency Ratio
Source: Capital IQ

14. Improved Consolidation Platform
Financial Analysis
Greenblatt Ratios
Improved Consolidation Platform
Source: 10K reports & Investor relation reports

15. Comparable Valuation Comparable Companies
Service Corporation International (SCI)
North America's largest provider of funeral, cremation and cemetery services
More than 2,000 funeral homes and cemeteries in 45 states, eight Canadian provinces, the District of Columbia and Puerto Rico.
StoneMor Partners (STON)
316 cemeteries and 100 funeral homes in 27 states and Puerto Rico
Bad operation performance recently and heavy in debt
Matthews International Corporation (MATW)
Around 40% of the revenue come from funeral and cemetery services business
Largest percent of revenue comes from bronze plaques (27%, 2011 data)
Hillenbrand (HI)
Sells 45% of caskets sold in the United States (2011 data)
Source:

16. Stock Market Prospects
Cumulative Returns since March 2012
Source: Google Finance:
As of 17th April 2017

17. Comparable Analysis Profitability Ratio Efficiency Ratio
Liquidity Ratio
Solvency Ratio
Source: Capital IQ

18. The price range using comparable analysis is between $31.2 and $34.6
Comparable Valuation
The price range using comparable analysis is between $31.2 and $34.6

19. DCF Valuation Assumptions – Revenues & Cost of Sales
Forecasts provided by Carriage Services
Source: Investor relation reports

20. DCF Valuation
Assumptions – Discount Rate

21. DCF Valuation Valuation – Perpetuity Growth Method Discount Rate – 10%
Terminal Discount Rate – 8%
Terminal Growth Rate – 3%

22. DCF Valuation
Sensitivity Analysis

23. Technical Analysis The moving averages are on an upward trend
Source:

24. Best Margins in the Industry Potential target for SCI
Recommendation
Aging Population
Best Margins in the Industry
Potential target for SCI
BUY
200 Shares @
Market Price