Service Corporation International
Essay by jowjowjow • July 31, 2017 • Case Study • 551 Words (3 Pages) • 1,084 Views
Service Corp. International Case
Jinwei Wang A52952307
1. Should SCI continue to grow? Is this strategy optimal for shareholders? How
Would you go about assessing the profitability of SCI's growth strategy?
From Exhibit 4
years | 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 |
Revenue Growth rate | 15.01% | 8.56% | 14.22% | 20.07% | 16.42% | 24.23% | 47.70% |
Profit Growth rate | 10.02% | 12.94% | 18.79% | 24.51% | 18.65% | 29.54% | 50.73% |
Net income Growth rate | -554.72% | -224.9% | 21.93% | 17.85% | 16.88% | 29.57% | 37.40% |
Acquisition cost-net income ratio | -89.21% | 139.53% | 508.17% | 235.84% | 218.60% | 621.37% | 666.67% |
DPS Growth rate | 16.13% | 2.78% | 0 | 5.41% | 2.56% | 5% | 7.14% |
Retention rate | -136% | 56.5% | 64.1% | 65.5% | 66.9% | 72.2% | 73.4% |
From this data table we can see that the revenue, the profit and the net income of SCI was growing steadily from 1989 to 1995. However,the divide per share grows very slow .And additionally, the acquisition cost was far exceed the net income, and SCI had to maintain a high retention rate to provide fund for acquisition and interest expense.
From Exhibit 7 Exhibit 8
years | 1992 | 1993 | 1994 |
ROE | 12.7% | 11.7% | 10.95% |
P/E(stock price at the end of the year) | 16 | 21 | 18 |
From above we can know that the company had the normal ROE ,12.7%,11.7% and 10.95%.And the price-earning ratio were also not very high, they were 16,21, and 18. Although, SCI had relatively high revenue rate and high revenue growth rate, high net income growth rate.The dividend per share growth rate was not reasonable compared to its revenue and net income growth rate.What’s more, its ROE and PE were also ordinary. In order to pay the acquisition cost, SCI maintained a high retention rate. SCI can expand its scale by acquire more corporations.However, SCI needed to raise more money to pay the acquisition cost.This is not good for the shareholders.
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