Dying in the U.S. is expensive. The average funeral — from the flowers to the plot — costs nearly $8,000. The funeral industry is virtually recession-proof as people’s lives end with no consideration for how the economy is performing, whether their family members can afford a funeral, etc. In 2021, the funeral home market size in the U.S. grew to 16 billion dollars.
This kind of strong business model and growth may have had you wondering whether there are publicly traded funeral companies and if they’re good investments. Keep reading to find the answer to those questions — and more.
Are Funeral Home Stocks A Good Investment?
U.S. Covid deaths are expected to reach 1 million in the spring of 2022. But, that’s just Covid. It doesn’t account for the opioid epidemic, aging population, increases in cancer, and a number of other factors that cause death.
Profitable funeral homes are very much still in existence, and many will continue to be successful, especially if they focus on increasing their profits by:
- Price increases
- Acquisitions
- Increasing pre-need sales
- Improving their operating margins
- Offering new, innovative products and services
Today, profit margins for funeral homes have dropped to 6 to 7 percent.
Many people already consider traditional funeral prices to be outrageous, so raising prices may not be a viable option for some funeral home owners. One tip to increasing profits without raising prices is to focus on selling funeral services and/or plots in advance of someone’s death.
Sales growth of funeral homes is quite natural as the global population has grown by 400% over the last 100 years — this provides a steady flow of business and cash to death care companies and will continue to do so.
Today, about 2.6 million Americans die each year. A trend that’s expected to be closer to 5 million by 2040 as the U.S. population grows and ages.
How Big Is The Death Industry?
The death care industry makes a killing — pun intended. The U.S. death care market alone is expected to reach revenues of around $68 billion by 2023.
The death care industry is made up of several companies and organizations providing death-related services, including:
- Funerals
- Coffins
- Cremations
- Burials
- Memorials
- Headstones
In the United States, the death care industry is majority made up of small, family-owned businesses.
Within the death care industry, funeral homes dominate more than half of the market share. Funeral homes are adding new services and adaptations to continue this growth, including:
- Reception rooms
- Banquet spaces
- Kitchen space and equipment
- Ample parking
- On-site therapists and grief counselors
- Drive-through funeral options (particularly helpful during Covid-19 quarantine and social distancing periods)
Cremation is gaining ground on the funeral home business’s number one spot as more and more Americans opt for cremation. But, these people still purchase property at cemeteries to have a place for their loved ones to visit after they pass.
Is there A Funeral Home ETF?
No. There are no funeral ETFs per se for people looking for more diversified investments within the death care industry. Service Corporation International is as close as one can get to a broadly diversified company with exposure to funeral homes and more.
Funeral ETFs are an excellent option for investing in the funeral industry without so much worry about market fluctuations and changes in death care trends. For instance, invest in an ETF with caskets and cremation services, and suddenly you’re protected from any declines in casket use and rises in cremation — or vice versa.
ETFs are also lauded for how they offer more safety during volatile periods, i.e., the pandemic. This is because when there are limits on how many people can gather in one spot, a family member may opt for a simple cremation when they otherwise would have planned a large gathering.
These situations can cause individual death care companies to go out of business or at least lose significant profits. But, they’ll likely be just a dip in the ETF price, and they also retain the ability to recover.
You can easily find funeral ETFs on most major stock exchanges.
What Company Owns Most Funeral Homes?
Three large companies now own 15% of the 23,000 funeral homes in the United States:
- Service Corporation International (SCI)
- Loewen Group Inc.
- Stewart Enterprises Inc.
Are There Publicly Traded Funeral Companies?
Yes. Both privately held and publicly traded funeral homes exist. There are 24 publicly listed death care companies on stock exchanges worldwide.
If you’re thinking about investing in a death care stock, here are some things to consider:
- Margins and financial ratios
- Debt levels
- Regulations
- Prospects for acquisition
- Competitiveness of the landscape
- The death rate in the company’s target markets
- List of services provided — this is important as trends change
Casket Stocks
The casket industry makes caskets, burial cases, and vaults. People commonly buy caskets directly from the funeral home, but some opt to buy them straight from the manufacturer.
The coffin and casket manufacturing market size is about $632 million for 95 companies.
Something to keep in mind is that as more people choose cremation over burials, the casket industry is starting to experience a decline. If you still want to invest in casket stocks, we recommend sticking with larger corporations, like Batesville Casket Company.
But, in our expert opinion, if you’re going to invest in the death industry, you should opt for cremation stocks over casket stocks.
What Company Makes Coffins?
The top coffin manufacturers in the United States are:
- Batesville Casket Company (A divison of Hillenbrand)
- Matthews International Corp.
- Aurora Casket Co.
- Suhor Industries Inc.
- Thacker Caskets Inc.
- Southern Craft Manufacturing
Cremation Stocks
Cremation now accounts for 57.5% of all funerals in the United States. By 2030, the National Funeral Directors Association predicts it will account for roughly 80% of all funerals.
There are several reasons for this growth, including the fact that cremation is much more affordable than traditional funerals. It’s also a green alternative as there are no harmful chemicals involved like in embalming.
As cremation continues to grow in popularity, it’s likely that shareholders in this industry will reap the rewards.
Death Care Stocks
Some of the strongest death care stocks to invest in are:
- Carriage Services (NYSE:CSV): The fourth largest publicly traded death care company, Carriage Services operates more than 230 funeral homes in 25 states. They also operate 33 cemeteries in 12 states. Earnings grew by 174.1% over the past year and are forecast to grow 40.48% per year. Carriage Services is a nearly $400 million business.
- Service Corporation International: Service Corp International owns and operates 1,900 funeral service locations and 483 cemeteries — 287 of which are combined locations offering both services. Service Corp International operates in 45 U.S. states and 8 Canadian provinces. SCI is growing both revenues and EBIT margins and has an 11.8% estimated long-term earnings growth rate. SCI is valued at more than $5 billion, and revenue continues to soar.
- Hillenbrand (HI): Some valuation metrics indicate that Hillenbrand might be an undervalued stock. It’s a good choice for value investors. Hillenbrand’s Batesville segment manufactures and sells funeral services products, including:
- Urns
- Caskets
- Containers
- Memorialization products
- Technology solutions
Hillenbrand has benefited from an effort to improve the customer experience through excellence in manufacturing, dependable delivery, and product innovation.
- StoneMor Partners (NYSE: STON): This death care company runs 322 cemeteries and 90 funeral homes across 27 states and Puerto Rico, making it the second largest funeral home and cemetery network in the United States.
- Matthews International (NYSE:MATW): Matthews International started as a small print shop in Pittsburgh. Today, it employs 11,000 people in more than 250 locations around the world. Matthews is the United State’s largest copper and granite monument supplier, its most profitable segment that makes up 75% of its annual profits. Matthews also designs and creates mausoleums and coffins and even has an entity called Matthews Environmental Solutions that specializes in technologically advanced equipment for cremation.
It’s safe to say that the need for death care services is not going anywhere. So, investments in the industry are definitely worthy of consideration. It’s important to remember that the industry is fast-changing as trends and preferences evolve. But, investing in some death care stocks is a fairly low-risk to dip your toes in the death care services investment pond.
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