Carriage Services (CSV): A Resilient Buy in the Aging Demographics Story

The U.S. demographic landscape is undergoing a seismic shift. By 2055, the population aged 65 and older will grow from 17% of the total population to nearly 25%, according to the Congressional Budget Office. This aging cohort is not merely a statistical inevitability—it is a tailwind for industries that cater to the end-of-life cycle. Carriage Services, Inc. (CSV), a leading provider of funeral and cemetery services, is uniquely positioned to capitalize on this demographic inevitability. With a combination of margin expansion, strategic acquisitions, and a growing demand for cremation and personalized services, CSV offers a compelling case for investors seeking exposure to a sector insulated from macroeconomic volatility.

The Aging Population: A Tailwind for Demand

The U.S. is aging at an unprecedented rate. The CBO projects that the ratio of working-age individuals (25–64) to elderly (65+) will shrink from 2.8 to 1 in 2025 to 2.2 to 1 by 2055. This shift means more deaths annually, directly driving demand for funeral services. In 2024, the U.S. funeral homes market was valued at $13.03 billion, with a projected compound annual growth rate (CAGR) of 5.92% through 2030. By 2030, the market is expected to reach $18.29 billion, fueled by an aging population and rising cremation rates.

Cremation, in particular, is reshaping the industry. The National Funeral Directors Association (NFDA) reports that the cremation rate in the U.S. rose to 60.5% in 2023 and is projected to hit 81.4% by 2045. This shift is driven by cost-effectiveness, environmental consciousness, and changing cultural norms. Western states like Washington and Oregon are already seeing cremation rates exceed 80%, while the Southeast and Midwest are catching up. For Carriage Services, which operates 159 funeral homes and 28 cemeteries across 25 states, this trend is a double-edged sword: it reduces reliance on traditional burial revenue but opens new avenues for growth in cremation and green burial services.

Margin Expansion: Operational Efficiency and Cost Discipline

Carriage Services has demonstrated a disciplined approach to margin management. In Q2 2025, the company reported a 85.7% year-over-year increase in GAAP net income to $5.5 million, with adjusted diluted EPS rising 17.5% to $0.74. These gains were driven by a 2.6% increase in consolidated funeral revenue and a 4.4% rise in average price per preneed interment right sold.

The company's cost structure has also improved. General, administrative, and other expenses fell by $6.7 million in Q2 2025, while interest expenses declined by $1.3 million. This operational efficiency has reduced the company's leverage ratio from 4.6x to 4.2x since 2024, reflecting a strategic shift from debt reduction to growth-focused capital allocation.

Strategic Acquisitions: Fueling Long-Term Growth

Carriage Services is no stranger to strategic acquisitions. In Q2 2025, the company announced plans to acquire businesses generating over $15 million in annual revenue, with closings expected later in the quarter. These acquisitions align with the CEO's stated pivot from “disciplined capital allocation” to “high-quality expansion.” The CEO, Carlos Quezada, emphasized that the company is “returning to growth through acquisitions,” a move that should enhance revenue diversification and geographic reach.

The acquisitions also address a critical industry challenge: the shift from traditional burial to cremation. By acquiring firms with strong cremation and green burial capabilities, Carriage Services is future-proofing its business model. For example, the company's recent partnerships to enhance pre-arranged funeral services and digital memorial platforms position it to capture the growing demand for personalized, tech-enabled end-of-life solutions.

Investment Thesis: Undervalued Potential in a Resilient Sector

Despite its strong fundamentals, Carriage Services remains undervalued. The stock trades at a price-to-earnings (P/E) ratio of 12x, significantly below the S&P 500's 22x, and offers a dividend yield of 1.8%. This discount reflects the sector's unglamorous nature and investor skepticism about margin sustainability. However, the aging population and rising cremation rates create a durable demand floor, while the company's operational discipline and acquisition strategy provide a clear path to margin expansion.

For investors, the risks are manageable. Regulatory scrutiny of the funeral industry remains a concern, but Carriage Services' compliance with the FTC's Funeral Rule and OSHA standards mitigates this risk. Additionally, the company's focus on pre-need sales—where customers pre-arrange and pre-pay for services—reduces revenue volatility and ensures long-term cash flow.

Conclusion: A Buy for the Long-Term

Carriage Services is a rare combination of defensive and growth characteristics. The aging U.S. population ensures a steady demand for its services, while the shift to cremation and green burials opens new revenue streams. With a disciplined approach to cost management, a robust acquisition pipeline, and a growing focus on digital innovation, CSV is well-positioned to outperform in a sector often overlooked by investors. For those seeking a resilient, undervalued play on the demographic tailwinds reshaping America, Carriage Services is a compelling buy.