Funeral services company Service International (NYSE:SCI) reported Q1 CY2024 results beating Wall Street analysts' expectations, with revenue up 1.6% year on year to $1.05 billion. It made a non-GAAP profit of $0.89 per share, down from its profit of $0.93 per share in the same quarter last year.

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Founded in 1962, Service International (NYSE: SCI) is a leading provider of death care products and services in North America.

Specialized Consumer Services

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.

Sales Growth

A company's long-term performance can indicate its business quality. Any business can enjoy short-lived success, but best-in-class ones sustain growth over many years. Service International's annualized revenue growth rate of 5.2% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Service International's recent history shines a dimmer light on the company as its revenue was flat over the last two years.

We can better understand the company's revenue dynamics by analyzing its number of funeral services performed, which reached 94,366 in the latest quarter. Over the last two years, Service International's funeral services performed averaged 3.2% year-on-year declines. Because this number is lower than its revenue growth during the same period, we can see the company's monetization of its consumers has risen.

This quarter, Service International reported reasonable year-on-year revenue growth of 1.6%, and its $1.05 billion of revenue topped Wall Street's estimates by 2.7%. Looking ahead, Wall Street expects sales to grow 2.2% over the next 12 months, an acceleration from this quarter.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

Over the last two years, Service International has shown decent cash profitability, giving it some reinvestment opportunities. The company's free cash flow margin has averaged 10.2%, slightly better than the broader consumer discretionary sector.

Service International's free cash flow came in at $140.3 million in Q1, equivalent to a 13.4% margin and in line with the same quarter last year.

Key Takeaways from Service International's Q1 Results

It was good to see Service International beat analysts' revenue expectations this quarter based on higher-than-expected volumes (funeral services performed). We were also happy its EPS narrowly outperformed Wall Street's estimates. For the full year, EPS guidance was right in line with expectations, showing no surprises in the business. Zooming out, we think this was a decent quarter, showing that the company is staying on target. The stock is flat after reporting and currently trades at $71.96 per share.

So should you invest in Service International right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.