The Case of the Overperforming Deathcare Stock: SCI’s Shareholder Returns vs. Earnings

The neon lights of Wall Street flicker as I, Tucker Cashflow Gumshoe, step into the dimly lit office of Service Corporation International (NYSE:SCI). The air smells like old coffee and stale donuts—standard fare for a financial detective on the trail of a curious case. The victim? A stock whose total shareholder returns have been outpacing its earnings growth. The suspect? Investor optimism. The motive? A deathcare industry that’s as steady as a hearse in a funeral procession.

The Setup: A Funeral Home with a Killer Stock Performance

Let’s set the scene. SCI, the largest deathcare company in North America, has been quietly raking in profits while the rest of the market’s been riding the economic rollercoaster. Over the past five years, the company’s earnings per share (EPS) have grown at a respectable 8-13% annual clip. Nothing to sneeze at, but certainly not the kind of numbers that would make a Wall Street hotshot drop his latte.

But here’s the kicker: SCI’s total shareholder returns have been on a tear. A 45% return over the last year alone, and a jaw-dropping 572% over the past decade. That’s not just beating the S&P 500—it’s leaving it in the dust like a hearse at a drag race.

Now, any gumshoe worth his salt knows that when returns outpace earnings, something’s up. Either the market’s got a case of the optimism flu, or there’s more to this story than meets the eye.

The Motive: A Deathcare Industry That’s Always in Demand

First stop on our investigation: the deathcare industry itself. Unlike tech stocks or retail chains, this isn’t a business that’s subject to fads or economic downturns. People die. And when they do, SCI’s there to handle the arrangements. That’s a pretty steady gig.

With an aging population and a market that’s as inelastic as a corpse, SCI’s got a built-in customer base. No matter how bad the economy gets, folks still need funerals. That’s the kind of stability that makes investors salivate like a dog outside a butcher shop.

But it’s not just demand that’s driving SCI’s stock. The company’s got economies of scale that would make a warehouse clerk weep with joy. As the biggest player in the game, SCI can negotiate better deals, keep costs low, and maintain pricing power. That’s the kind of competitive advantage that keeps shareholders happy.

The Evidence: Earnings Growth and Market Volatility

Now, let’s talk numbers. SCI’s been putting up solid earnings growth, with adjusted EPS climbing from $0.89 to $0.96 in the first quarter of 2025, and then to $1.06 in the fourth quarter of 2024. That’s a nice little trend, and it’s exactly what you’d expect from a well-run company in a stable industry.

But here’s where things get interesting. Despite that steady growth, SCI’s stock has taken a bit of a tumble recently—a 14% decline in the last quarter. Now, that might sound like a red flag, but in the grand scheme of things, it’s not the end of the world. After all, even the best stocks take a hit now and then. Just look at Camtek and Zebra Technologies—they’ve been through the wringer too.

The real question is whether this dip is a temporary blip or a sign of deeper trouble. Given SCI’s long-term track record, I’m leaning toward the former. But I’m not ready to close the case just yet.

The Suspect: Investor Optimism

So, if the earnings growth is solid but not spectacular, and the industry is stable but not exactly high-flying, what’s driving those outsized returns? The answer, my friends, is investor optimism.

The market’s betting that SCI’s got more tricks up its sleeve than just handling funerals. The company’s been diversifying its offerings, getting into pre-need arrangements, memorialization products, and even digital solutions. That’s the kind of innovation that can drive future growth and keep shareholders happy.

But here’s the thing about optimism: it’s a fickle beast. One wrong move, and it can turn on a dime. That’s why SCI’s got to keep delivering on its promises. If the company can hit its 2025 EPS projections, it’ll go a long way toward keeping the faith.

The Verdict: A Strong Case for Long-Term Growth

After sifting through the evidence, it’s clear that SCI’s got a lot going for it. The company’s got a stable industry, a strong market position, and a track record of innovation. Sure, there’s been some volatility lately, but that’s par for the course in the stock market.

At the end of the day, SCI’s a solid bet for investors looking for steady growth. The company’s ability to outperform its earnings growth is a testament to the market’s confidence in its future prospects. And as long as SCI keeps delivering, those returns should keep coming.

So, is SCI’s stock overvalued? Maybe. But in a world where certainty is a rare commodity, the deathcare industry offers a unique kind of stability. And that’s something worth betting on.

As I close the case file and head out into the neon-lit streets of Wall Street, I can’t help but think that SCI’s story is far from over. The company’s got a bright future ahead—assuming, of course, that the market doesn’t get cold feet.

But that’s a story for another day. For now, the case of the overperforming deathcare stock is closed. And the verdict? Guilty of delivering killer returns.