Essay About Acquisition Cost-Net Income Ratio-89.21 And Net Incomegrowthrate-554.72

Service Corporation International
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Service Corp. International Case                        Jinwei Wang A529523071. Should SCI continue to grow?  Is this strategy optimal for shareholders?  How     Would you go about assessing the profitability of SCIs growth strategy?From Exhibit 4years1989199019911992199319941995RevenueGrowthrate15.01%8.56%14.22%20.07%16.42%24.23%47.70%ProfitGrowthrate10.02%12.94%18.79%24.51%18.65%29.54%50.73%Net incomeGrowthrate-554.72%-224.9%21.93%17.85%16.88%29.57%37.40%Acquisition cost-net income ratio-89.21%139.53%508.17%235.84%218.60%621.37%666.67%DPSGrowthrate16.13%2.78%05.41%2.56%5%7.14%Retentionrate-136%56.5%64.1%65.5%66.9%72.2%73.4%  From this data table we can see that the revenue, the profit and the net income of SCI was growing steadily from 1989 to 1995. However,the divide per share grows very slow .And additionally, the acquisition cost was far exceed the net income, and SCI had to maintain a high retention rate to provide fund for acquisition and interest expense.                                        From Exhibit 7 Exhibit 8years199219931994ROE12.7%11.7%10.95%P/E(stock price at the end of the year)162118  From above we can know that the company had the normal ROE ,12.7%,11.7% and 10.95%.And the price-earning ratio were also not very high, they were 16,21, and 18. Although, SCI had relatively high revenue rate and high revenue growth rate, high net income growth rate.The dividend per share growth rate was not reasonable compared to its revenue and net income growth rate.What’s more, its ROE and PE were also ordinary. In order to pay the acquisition cost, SCI maintained a high retention rate. SCI can expand its scale by acquire more corporations.However, SCI needed to raise more money to pay the acquisition cost.This is not good for the shareholders.