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A Stock to Die For – Carriage Services, Inc.

December 04, 2008 | About:
CSV [NYSE] November 3, close: $2.28. 52-week range: $1.85 (Nov. 7, 2008) - $11.06 (Dec. 5, 2007)

Carriage Services provides death care merchandise and services including funerals, cremation, caskets, funeral home and cemetery facilities etc. They operate 136 funeral homes and 32 cemeteries in 11 states.

CSV shares have plummeted from over $11 after a proposed buyout of the company was cancelled. Management has been actively taking advantage of what they feel is a major undervaluation in the share price by repurchasing shares. Through October they had retired over 1.347 million shares [out of 19.22 million outstanding at Y.E. 2007] at an average cost of $3.68 /share.

Company Insiders have been steady buyers also with 11 separate open-market purchases since July 3rd at prices ranging from $7.17 down to $1.99.

Recent Insider Trading Activity: Carriage Services Inc

Date Name Transaction Num Shares Price(s) Value

11/12/08 FORBES GARY L

Purchase 5,000 $2.00 10,000.00

11/07/08 PAYNE MELVIN C

Purchase 37,500 $1.99 74,625.00

11/07/08 DODDS JAY D

Purchase 8,000 $1.99 15,920.00

10/06/08 DAVIS JOE ROBERT

Purchase 3,283 $3.65 11,982.95

10/06/08 FORBES GARY L

Purchase 1,635 $3.05 4,986.75

09/19/08 FORBES GARY L

Purchase 5,000 $3.25 16,250.00

09/10/08 DODDS JAY D

Purchase 6,250 $3.80 23,773.13

09/08/08 PAYNE MELVIN C

Purchase 10,000 $3.88 38,759.00

07/03/08 FOSTER VINCENT D*

Purchase 4,408 $7.17 31,605.36

07/03/08 DAVIS JOE ROBERT

Purchase 1,729 $7.17 12,396.93

07/03/08 FORBES GARY L

Purchase 974 $7.17 6,983.58

Earnings have been decent with the past three years’ per share numbers shown here:

Year……Sales ….. Cash Flow …… Earnings …. Book Value

2006 …..$8.12 ……. $0.67 ……….. $0.20 ……… $5.18

2007 …..$8.73 ……. $0.89 ……….. $0.39 ……… $5.56

2008 …..$9.75 ……. $0.99 ……….. $0.23 ……….$5.80

*2008 figures include Q4 consensus estimates

Regardless of how bad economic conditions may get, people are still going to die. Carriage Services shares now trade at just under 10 times 2008 estimates and 6.7 times the company’s own projection of $0.34 for 2009. CSV also now trades at a 60% discount to book value.

Management has expressed confidence in their future by buying shares for themselves and for the company. They have shown a willingness to sell the entire firm and a renewed offer by another industry player is a distinct possibility for the future. Even a lower offer than was on the table previously might see a doubling or tripling of today’s share price.

What price target seems reasonable here? CSV shares hit peak prices of more than book value in 2005 – 2006 and 2007. Even one times current book value would bring shares back towards $6 within a year or up more than 160%. A price/earnings of just 10x 2009 projections leads to a $3.40 price over the next 13 months or + 49%.

Is it realistic to think we could see $5 or higher over the next year or two?

These shares traded at $5.50, $6.75, $5.25, $11.09 and $9.45 at their highs in each calendar year from 2004 right through 2008. In fact, excepting recent weeks, the absolute lows in those same years ran from $3.72 (in 2004) to $4.12 (in 2006). Even those old lows would provide a very nice return from the current price.


Disclosure: Author is long shares of Carriage Services.

About the author:

Dr. Paul Price
http://www.RealMoneyPro.com
http://www.TalkMarkets.com

Visit Dr. Paul Price's Website


Rating: 2.6/5 (15 votes)

Comments

sapcap
Sapcap - 5 years ago
Why CSV over SCI?
Dr. Paul Price
Dr. Paul Price premium member - 5 years ago
I think the takeover possibility and the heavy insider buying in CSV give this one the edge.

Also, CSV is expecting higher EPS in 2009 while SCI is expecting lower EPS.
sapcap
Sapcap - 5 years ago
looks like insider buying at SCI as well as a $150 share repurchase. I think both should fair well long term given the demographics.
Dr. Paul Price
Dr. Paul Price premium member - 5 years ago
Three Insider buys on Carriage Services were reported in this week's Barrons.

16,517 shares total for $56,000 or $3.39 /share average price.

These shares are now up 41.6% since my December 4, 2008 write-up.
Dr. Paul Price
Dr. Paul Price premium member - 4 years ago


Still more insider buying on Carraige Services.

CSV closed at $4.06 yesterday - up over 78% since my write-up last December.


This may benefit if the Swine flu causes as many otherwise-avoidable deaths this winter as the US Dept. of Health is predicting.




















































































ERICKSON RONALD ADirector2009-10-05Buy3351$3.863.63
HEILIGBRODT L WILLIAMDirector2009-10-05Buy1675$3.863.63
SCOTT RICHARD WALDODirector2009-10-05Buy1420$3.863.63
FOSTER VINCENT DDirector2009-10-05Buy3351$3.863.63
HEILIGBRODT L WILLIAMDirector2009-07-08Buy1664$3.5313.31
HEILIGBRODT L WILLIAMDirector2009-07-08Buy1664$3.5313.31
FOSTER VINCENT DDirector2009-07-07Buy11214$3.3718.69
ERICKSON RONALD ADirector2009-07-07Buy3639$3.514.29
FOSTER VINCENT DDirector2009-07-07Buy11214$3.3718.69
ERICKSON RONALD ADirector2009-07-07Buy3639$3.514.29


Dr. Paul Price
Dr. Paul Price premium member - 4 years ago
Carriage Services Announces 2009 Record Fourth Quarter and Year End Results

Carriage Services, Inc. (CSV) today announced results for the fourth quarter and year ended December 31, 2009.

YEAR 2009 FINANCIAL RESULTS

Melvin C. Payne, Chairman and Chief Executive Officer, stated, "I am proud beyond words of the amazing job our operating leaders and employees performed in 2009 during the worst economic and financial crisis since the Great Depression. We finished the year with a strong fourth quarter, including record Total Revenue of $45.1 million, record Consolidated EBITDA of $10.4 million and record tying EPS of $0.10 versus a GAAP EPS loss of $0.09 in 2008. But even though the fourth quarter was great, it was the full year 2009 performance that signaled completion of our transformation over the last six years into an outstanding deathcare operating company." Highlights of the 2009 year compared to 2008 performance (before special charges) were as follows:

Record Total Revenues, up $700,000 or 0.4% from 2008 to $177.6 million;

Record Cemetery Preneed Property Revenue, up $4.2 million or 25.5% from 2008 to $20.8 million;

Record Field EBITDA, up $2.3 million or 3.9% from 2008 to $61.6 million;

Record Consolidated EBITDA, up $2.3 million or 5.9% from 2008 to $41.5 million;

Consolidated EBITDA Margin of 23.3%, up 120 basis points from 22.1% in 2008;

Record EPS of $0.40 under current accounting rules, up 33% from Adjusted EPS of $0.30 in 2008;

Record Total Trust Fund Market Value, up $60 million or 43.0% to $198.1 million at year end 2009 compared to year end 2008;

Completion of our $10 million Stock Repurchase Program during which we repurchased 3.1 million shares equal to 15% of fully diluted shares outstanding.

"We had so many performance heroes in our company during 2009 that it would be impossible to list or mention them all, but suffice it to say that they know who they are and realize that each of them made an important contribution to our total company performance," continued Mr. Payne. "More than anything else, our record performance in 2009 was not only differentiating within the universe of most public companies, it was confirmation that our Standards Operating Model in combination with our 4E Leadership Model has achieved broad traction and effectiveness and has become the defining framework for Carriage's high performance culture.

"We made two small but strategic acquisitions in the fourth quarter of 2009 and are actively evaluating candidates using our Strategic Acquisition Model. As consolidation of our industry continues, we are confident that we can selectively grow by acquisition which will be a smart use of our capital and add substantial value to our shareholders over the next five years."

FOUR QUARTER OUTLOOK 2010

"After the record performance of 2009, we are confident that our 2010 performance will be even better, so we are raising all of our key performance metrics for the four quarters ending December 31, 2010, including earnings to be in the range of $0.42 - $0.45 per diluted share," concluded Payne.

Feb 18 01:52 PM EditReply

+10


Dr. Paul Price
Dr. Paul Price premium member - 4 years ago


Hmm...

CSV recommended here on Nov. 3, 2008 at $2.28 /share.

CSV trading on Feb. 19, 2010 at................. $4.35 /share.

Up 90.8% in 15.25 months.

A one-star rating? Who's the a**hole here?
DaveinHackensack
DaveinHackensack - 4 years ago
Nice work with this trade, Paul.

expectingrain
Expectingrain - 4 years ago
I've been looking at the "death industry" too lately-- have you reviewed HI- Hillenbrand?
Dr. Paul Price
Dr. Paul Price premium member - 4 years ago


Yes. I wrote up Hillenbrand some months ago.
expectingrain
Expectingrain - 4 years ago
Do you happen to have a link to it?



Yes. I wrote up Hillenbrand some months ago.
Dr. Paul Price
Dr. Paul Price premium member - 4 years ago

From www.BeatingBuffett.com

Hillenbrand Inc. - “Dead Money” that’s good for you.



July 20th, 2009

These shares have been trading as a separate entity since their spin-off from Hill-Rom Holdings on March 24, 2008. The company has been virtually ignored by the investment community ever since with little analyst coverage and no real sponsorship. Underfollowed issues often provide opportunity.






Hillenbrand is the holding company for Batesville Casket Company. They provide ‘death care’ products such as burial caskets, cremation urns and containers plus other memorialization products. The aging of America would suggest a growing need for their products and services.

[/b][b]Hillenbrand [NYSE:HI] July 20, 2009: $17.62

52-week range: $13.28 (Nov. 21, 2008) - $24.80 (Aug. 11, 2008)

Dividend = $0.185 quarterly = 4.19% current yield

The nature of the industry has been a plus in our poor economy.

Death waits for no man- keeping HI’s sales and cash flow very steady.



Here are the per share numbers (from continuing operations) since 2007 as reported by Value Line (Fiscal Years end Sep. 30th) FY 2009 includes Zacks estimates for June and September:

FY …..… Sales …… C/F …… EPS …… Div …… B/V ….. Avg. P/E

2007 … 10.76 ….. 1.90 …… 1.60 ….. 0.73 ….. 2.92 ….… N/A

2008 … 10.92 ….. 2.00 ….. 1.68 ….. 0.73 ….. 4.64 …… 12.2x

2009 … 10.65 ….. 1.95 …… 1.68 ….. 0.74 ..…. 5.55 …… 10.6x

With a current yield of 4.19% and a P/E of< 10.5x the shares look inexpensive. They traded as high as $24.80 last August and touched $20 since the start of this year.

Here’s a nice short-term play that works well even if the shares just stay where they are from now through January 15, 2010:

………………………………………………Cash Outlay ………….. Cash Inflow

Buy 1000 HI @$17.62 …………………$17,620

Sell 10 Jan. $17.50 calls @$1.40 …………………………………$1,400

Sell 10 Jan. $17.50 puts @$1.60 …………………………………$1,600

Net Cash Out-of-Pocket ………………$14,620

If Hillenbrand shares remain above $17.50 on expiration date:

• The $17.50 calls will be exercised.

• You will sell your shares for $17,500.

• The $17.50 puts will expire worthless.

• You will have collected $370 in dividends.

• You will have no further option obligations.

• You will hold no shares and $17,870 in cash.

That’s a best-case scenario net profit of $3,250 on your initial

cash outlay of $14,620.

$3,250 / $14,620 = 22.2% total return

achieved in under 6 months on shares that did not need to move up at all.

What’s the risk?

Should Hillenbrand shares be< $17.50 on expiration date:

• The $17.50 calls will expire worthless.

• The $17.50 puts will be exercised.

• You will be forced to buy an additional 1000 shares.

• You will need to lay out another $17,500 of cash.

• You will have collected $370 in dividends.

• You will have no further option obligations.

• You will end up with 2000 shares of Hillenbrand.

What’s the break-even on the whole trade?

On the first 1000 shares it’s their $17.62 purchase price less

the $1.40 /share call premium = $16.22 /share.

On the ‘put’ shares it’s the $17.50 strike price less

The $1.60 /share put premium = $15.90 /share.

Your net cost would average $16.06 /share

excluding dividends and $15.69 /share net of yield.

Hillenbrand shares could drop by as much as 10.9% without causing

a loss on this trade.


Disclosure: Author is long Hillenbrand shares and short their options.

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