The Motley Fool Hidden Gems newsletter first recommended No. 2 U.S. death-care provider Alderwoods Group (NASDAQ:AWGI) in October 2003. The recommendation summary said (among three points) that the "stock is worth 75% more even assuming no growth."
Well, fast-forward almost two years, and that recommendation is up 121.3%. Let's take a look at the company's second-quarter results and see whether we can find any more good news.
Look at the hard numbers, and you see a lot to like compared with the same quarter last year. Sales, for one, rose 8.9%. Not only was this the 13th consecutive quarter of increased averagerevenue per funeral service, but also the number of same-site funerals rose 1.5%, while same-site average revenue per funeral rose 2.8%.
Earnings went from a loss of $0.16 to a profit of $0.29 a share (fully diluted) and handily beat the $0.16-a-share estimate by the one analyst who follows the company. The stock responded by jumping $0.75 a share to a new 52-week high.
Part of Alderwoods' restructuring story has been its disposing of assets and reducing debt. During the quarter, total debt fell $22.1 million to $409.9 million. Because capital expenditures will peak during the next two quarters, debt repayments for the rest of 2005 will not come close to matching Q2 numbers.
Alderwoods trades at 22 times 2005 forward earnings. That number should drop once this quarter's results get factored in. Still, that's a discount to industry leader Service Corp (NYSE:SCI), which trades at 27.7 times 2005 estimates.
Alderwoods' goal has been to fuel organic growth. While the stock appears to be attractively priced, investors should also take a look at competitor Stewart Enterprises (NASDAQ:STEI), which might be in a similar situation to that of Alderwoods when it was recommended back in 2003.
For related news, check out this Fool by Numbers look at Alderwoods' quarterly financials.
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Fool contributor W.D. Crotty does not own shares in any of the companies mentioned. Click here to see The Motley Fool's disclosure policy.
