Carriage Services (CSV): A Strategic Turnaround Positions for FY26 Growth and Margin Expansion

Carriage Services, Inc. (CSV) has long been a fixture in the funeral and cemetery services industry, but recent strategic moves suggest the company is poised for a renaissance. After years of disciplined debt reduction and operational streamlining, CSV is now leveraging high-quality acquisitions to reignite top-line growth and expand margins—a combination that could make it a compelling buy for investors with a medium-term horizon.

Strategic Acquisitions: Fueling Revenue and Scale

In Q2 2025, Carriage Services announced its return to a growth-at-all-costs strategy, acquiring businesses that generated over $15 million in revenue in 2024. These acquisitions, expected to close by year-end, will add 2,600+ families served and expand the company's network of funeral homes and cemeteries. The move aligns with CEO Carlos Quezada's emphasis on “adding shareholder value through high-quality acquisitions,” a stark shift from the prior two years of divestitures and debt reduction.

The impact is already visible in revised 2025 guidance: total revenue is now projected at $410–$420 million (up from $400–$410 million), with adjusted EBITDA expected to reach $129–$134 million. These figures suggest that the acquisitions will not only boost revenue but also enhance operating leverage. For context, the company's EBITDA margin in H1 2025 hit 31.6%, up from 26.2% in the same period in 2024. With economies of scale from new locations, margins could continue expanding into FY26.

Debt Reduction: A Foundation for Future Growth

While acquisitions often raise leverage concerns, Carriage Services has managed its balance sheet with surgical precision. Over the past two years, the company paid down $100 million in debt, reducing its leverage ratio from 4.6x to 4.2x in Q2 2025. This deleveraging wasn't just a one-quarter effort—management has consistently prioritized debt reduction, paying down $7.1 million in Q2 2025 alone.

The result? A stronger financial position to fund future growth. With interest expenses declining and overhead costs dropping to 12.2% of revenue (from 20.0% in 2024), Carriage Services is now free to allocate capital toward accretive acquisitions without sacrificing profitability. This disciplined approach mirrors the playbook of companies like Caterpillar or Hewitt, which used debt reduction to fund strategic expansion during downturns.

Margin Expansion and Free Cash Flow: The Double Play

Carriage Services' cost discipline is another feather in its cap. General and administrative expenses fell by $10.9 million in H1 2025, contributing to a 23.5% operating margin—a 550-basis-point improvement year-over-year. These savings, combined with the revenue uplift from acquisitions, are creating a “double play” of margin expansion and free cash flow generation.

Adjusted free cash flow for H1 2025 reached $20.3 million, up from $18.2 million in 2024. With the company's leverage now at a manageable 4.2x, investors can expect continued reinvestment in growth opportunities. For context, CSV's free cash flow yield (FCF/enterprise value) currently stands at 8.5%, outpacing peers like Service Corporation International (SCI) and Dignity Memorial.

Why Now Is the Time to Buy

The market may not yet fully appreciate the magnitude of Carriage Services' turnaround. At a forward P/E of 12x and a P/EBITDA of 10x, CSV trades at a discount to its historical averages and peers. This undervaluation is unjustified given the company's:
1. Strong EBITDA growth (up 23% in H1 2025 vs. 2024).
2. Disciplined capital allocation (debt reduction + accretive acquisitions).
3. Margin expansion potential (overhead costs are still 12.2% of revenue, leaving room for further cuts).

Moreover, the funeral services industry is inherently defensive. With a growing aging population and limited supply of cemetery land, demand for Carriage Services' offerings is structural. The company's focus on preneed sales (contracts sold in advance) also provides a stable revenue stream, insulating it from short-term economic volatility.

Risks to Consider

No investment is without risk. The success of Carriage Services' strategy hinges on:
- Integration of new acquisitions—poor execution could dilute margins.
- Interest rate volatility—higher borrowing costs could pressure leverage.
- Regulatory scrutiny—the funeral industry has faced past investigations into pricing practices.

However, management's track record of disciplined execution and the company's strong cash flow generation mitigate these risks.

Final Verdict: A Buy for the Patient Investor

Carriage Services is at an inflection point. By combining strategic acquisitions with a leaner, more efficient cost structure, the company is setting itself up for sustained margin expansion and revenue growth in FY26. With a compelling valuation and a defensive business model, CSV offers a rare combination of upside potential and downside protection.

For investors willing to hold for 12–18 months, Carriage Services is a compelling buy. The key is to monitor the closing of its Q2 2025 acquisitions and the subsequent impact on FY26 guidance. If the company continues to execute, the stock could outperform broader market indices by a significant margin.