Carriage Services has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 15.3% to $44.50 per share while the index has gained 15.7%.

Is there a buying opportunity in Carriage Services, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Carriage Services Not Exciting?

We're cautious about Carriage Services. Here are three reasons why CSV doesn't excite us and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Carriage Services’s 6.9% annualized revenue growth over the last five years was sluggish. This was below our standard for the consumer discretionary sector.

2. Projected Revenue Growth Shows Limited Upside

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Carriage Services’s revenue to stall, a deceleration versus its 6.9% annualized growth for the past five years. This projection is underwhelming and indicates its products and services will face some demand challenges.

3. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Carriage Services historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 10%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

Final Judgment

Carriage Services isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 10.5× forward EV-to-EBITDA (or $44.50 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.

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