Critical Comparison: Service Corporation International (NYSE:SCI) and ADT (NYSE:ADT)

Service Corporation International (NYSE:SCI) and ADT (NYSE:ADT) are both consumer discretionary companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, analyst recommendations, valuation, profitability, dividends, risk and institutional ownership.

Insider and Institutional Ownership

85.5% of Service Corporation International shares are held by institutional investors. Comparatively, 87.2% of ADT shares are held by institutional investors. 3.4% of Service Corporation International shares are held by insiders. Comparatively, 3.0% of ADT shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Volatility & Risk

Service Corporation International has a beta of 0.81, suggesting that its stock price is 19% less volatile than the S&P 500. Comparatively, ADT has a beta of 1.04, suggesting that its stock price is 4% more volatile than the S&P 500.

Dividends

Service Corporation International pays an annual dividend of $1.44 per share and has a dividend yield of 1.9%. ADT pays an annual dividend of $0.22 per share and has a dividend yield of 3.4%. Service Corporation International pays out 37.6% of its earnings in the form of a dividend. ADT pays out 31.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Service Corporation International has raised its dividend for 15 consecutive years and ADT has raised its dividend for 1 consecutive years. ADT is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Service Corporation International and ADT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Service Corporation International	12.30%	34.38%	2.91%
ADT	11.85%	18.99%	4.40%

Analyst Ratings

This is a breakdown of recent recommendations for Service Corporation International and ADT, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Service Corporation International	0	0	4	0	3.00
ADT	1	4	2	0	2.14

Service Corporation International presently has a consensus target price of $100.67, indicating a potential upside of 31.06%. ADT has a consensus target price of $8.23, indicating a potential upside of 26.71%. Given Service Corporation International’s stronger consensus rating and higher possible upside, research analysts clearly believe Service Corporation International is more favorable than ADT.

Earnings and Valuation

This table compares Service Corporation International and ADT”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Service Corporation International	$4.37 billion	2.40	$542.61 million	$3.83	20.05
ADT	$5.13 billion	0.93	$595.95 million	$0.71	9.15

ADT has higher revenue and earnings than Service Corporation International. ADT is trading at a lower price-to-earnings ratio than Service Corporation International, indicating that it is currently the more affordable of the two stocks.

Summary

Service Corporation International beats ADT on 10 of the 17 factors compared between the two stocks.

About Service Corporation International

Service Corp. International engages in the provision of funeral goods and services. It operates through the Funeral and Cemetery segments. The Funeral segment offers services related to cremations, including the use of home facilities and motor vehicles, arranging and directing services, removal, preparation, embalming, memorialization, and catering. The Cemetery segment provides property interment rights, including lawn crypts, mausoleum spaces, niches, and interment options. The company was founded by Robert L. Waltrip in July 1962 and is headquartered in Houston, TX.

About ADT

ADT Inc. provides security, interactive, and smart home solutions to residential and small business customers in the United States. It operates through two segments, Consumer and Small Business, and Solar. The company provides burglar and life safety alarms, smart security cameras, smart home automation systems, and video surveillance systems. It primarily offers security designed to detect intrusion, control access, sense movement, smoke, fire, carbon monoxide, flooding, temperature, and other environmental conditions and hazards; and address personal medical emergencies, such as injuries or unanticipated falls. The company also provides automation and smart home solutions that allow customers to use their smart phones, smart phone application, or touchscreen panels in their homes to arm and disarm their security systems; record and view real-time video; and creates customized and automated schedules for connected devices; programs systems to react to defined events; integrates system with third-party connected devices, such as cameras, lights, thermostats, appliances, and garage doors, as well as offers monitoring and maintenance services. In addition, the company offers energy storage solutions, energy efficiency upgrades, and roofing services. It offers its products under the ADT, ADT Pulse, ADT+, and ADT Commercial brand names. The company was formerly known as Prime Security Services Parent, Inc. and changed its name to ADT Inc. in September 2017. ADT Inc. was founded in 1874 and is headquartered in Boca Raton, Florida.