Investment Thesis
Carriage Services demonstrates strong operational profitability and net income growth (+56.3% YoY) with solid 23.8% operating margins, but financial health is severely compromised by critical leverage risks. An interest coverage ratio of 1.0x provides no margin for error, combined with high debt-to-equity of 1.96x, minimal cash reserves of $2.9M, and weak ROE of 5.1%, creating unacceptable refinancing and solvency risk.
Strengths
- Net income surged 56.3% YoY with operating margin of 23.8%, demonstrating operational leverage
- Positive free cash flow of $11.0M (10.4% FCF margin) continues to service debt
- Revenue stabilizing with 3.3% YoY growth in mature funeral services sector
Risks
- Interest coverage of 1.0x is critically low - operating income barely covers interest with zero buffer for operational disruption
- High leverage (1.96x debt-to-equity, $522.3M debt vs $266.9M equity) creates acute refinancing risk
- Liquidity severely constrained with quick ratio of 0.99x and only $2.9M cash - insufficient for emergencies
- Capital efficiency deteriorating with ROE of 5.1% and ROA of 1.0% - poor returns on shareholder capital
Key Metrics to Watch
- Interest coverage ratio trajectory - must exceed 1.5x to reduce solvency risk
- Debt service capability and refinancing events - timing and terms critical at tight coverage levels
- Operating cash flow stability - essential with minimal liquidity buffers
- Revenue growth acceleration beyond 3.3% - needed to improve leverage ratios
Financial Metrics
Revenue
106.1M
Net Income
13.5M
EPS (Diluted)
$0.84
Free Cash Flow
11.0M
Total Assets
1.3B
Cash
2.9M
Profitability Ratios
Gross Margin
36.4%
Operating Margin
23.8%
Net Margin
12.7%
ROE
5.1%
ROA
1.0%
FCF Margin
10.4%
Balance Sheet & Liquidity
Current Ratio
1.15x
Quick Ratio
0.99x
Debt/Equity
1.96x
Debt/Assets
80.2%
Interest Coverage
1.01x
Long-term Debt
522.3M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-08T07:15:37.962823 |
Data as of: 2026-03-31 |
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