With ten times the sales of Park Lawn, Service Corporation has a 15% market share in North America. Other consolidators lag far behind, with 5% of market share, while the remaining 80% is in the hands of independents.
The opportunities for consolidation are therefore colossal. In many respects, however, Service Corp is the antithesis of Park Lawn: its growth is more modest, as the group returns all its profits to shareholders via dividends and share buybacks - whereas Park Lawn, on the other hand, increases its capital many times over.
In this way, Service Corp has halved the number of shares outstanding over the past twenty years, while constantly increasing its dividend payouts. The formula seems to be working well, since over ten years shareholders have enjoyed a return on their investment well in excess of that of the SP500.
Over the period 2012-2022, sales rose from $2.4 to $3.8 billion, with operating margin up from 17% to 22%. The Group generated total profits of $4 billion over the period. In addition, it returned $4.5 billion to shareholders and made $1 billion in acquisitions; logically, debt increased by exactly $1.5 billion.
Earnings per share triple between the beginning of the decade and its end, from roughly $1 to $3 per share. Value creation is evident here, both organically - through margin expansion - and via the billion invested in external growth.
These factors are highly encouraging, but we must not lose sight of the risks. First and foremost, there is the risk of price regulation - such as that which plunged the British operator Dignity PLC and the Australian Invocare into a state of near-bankruptcy - and of a marked decline in mortality rates following the Covid episode.
During the pandemic, for example, gross margins on Service Corp's two business segments rose by almost 30%. This trend seems difficult to sustain, especially in a context of pressure on household budgets.