Service Corporation International (NYSE:SCI) and H&R Block, Inc. (NYSE:HRB) are both Services companies that recently hit new low. Many investors are wondering what to do with these names trading at such extreme levels. To determine if one is a better investment than the other, we will compare the two across growth, profitability, risk, return, dividends, and valuation measures.
Service Corporation International (NYSE:SCI) operates in the Personal Services segment of the Services sector. The company has grown sales at a 5.50% annual rate over the past five years, putting it in the medium growth category. SCI has a net profit margin of 11.80% and is more profitable than the average company in the Personal Services industry. SCI’s financial leverage ratio is 9.99, which indicates that the company’s asset base is primarily funded by debt. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is 31.00%, which is better than the Personal Services industry average ROE.
Service Corporation International (SCI) pays out an annual dividend of 0.60 per share. At the current valuation, this equates to a dividend yield of 1.59%. The company has a payout ratio of 27.80%. SCI’s current dividend therefore should be sustainable. Stock’s free cash flow yield, which represents the amount of cash available to investors before dividends, expressed as a percentage of the stock price, is 1.12. All else equal, companies with higher FCF yields are viewed as cheaper. Company trades at a P/E ratio of 19.82, and is less expensive than the average stock in the Personal Services industry. The average investment recommendation for SCI, taken from a group of Wall Street Analysts, is 1.40, or a strong buy.
Over the past three months, Service Corporation International insiders have been net buyers, dumping a net of -132,679 shares. This implies that insiders have been feeling relatively bearish about the outlook for SCI. Insider activity and sentiment signals are important to monitor because they can shed light on how “risky” a stock is perceived to be at it’s current valuation. Knowing this, it makes sense to look at beta, a measure of market risk. SCI has a beta of 0.94 and therefore an below average level of market volatility.
H&R Block, Inc. (NYSE:HRB) operates in the Personal Services segment of the Services sector. HRB has increased sales at a 1.00% CAGR over the past five years, and is considered a low growth stock. The company has a net profit margin of 12.90% and is more profitable than the average Personal Services player. HRB’s return on equity of -105.80% is worse than the Personal Services industry average.
H&R Block, Inc. (HRB) pays a dividend of 0.96, which translates to dividend yield of 3.56% based on the current price. Stock has a payout ratio of 48.20%. According to this ratio, HRB should be able to continue making payouts at these levels. The company trades at a free cash flow yield of -5.9 and has a P/E of 14.29. Compared to the average company in the 23.68 space, HRB is relatively cheap. The average analyst recommendation for HRB is 3.00, or a hold. The average analyst recommendation for HRB is 3.00, or a hold.
H&R Block, Inc. insiders have sold a net of -2,553 shares during the past three months, which implies that the company’s top executives have been feeling bearish about the stock’s outlook. Finally, HRB’s beta of 0.42 indicates that the stock has an below average level of market risk.
Service Corporation International (NYSE:HRB) scores higher than H&R Block, Inc. (NYSE:SCI) on 8 of the 13 measures compared between the two companies. HRB has the better fundamentals, scoring higher on profitability, efficiency and leverage metrics. HRB has better insider activity and sentiment signals.