Here's why InvoCare Limited has been rising today

Listed funeral operator InvoCare Limited (ASX:IVC) continues to outperform the S&P/ASX 200 Index (Index: ^AXJO) (ASX:XJO).

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

What:  Leading funeral services provider InvoCare Limited (ASX: IVC) has released a solid set of interim results which reconfirms my view as outlined here that this is a high quality stock that would make a superb portfolio addition at the right price.

To highlight the performance of this business, take a look at InvoCare's share price appreciation over the past decade which has seen long-term investors enjoy a gain of 360%, compared to gains of just 60% from the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO)!

So what: At an operating level the half year after tax profit increased 12.8% to $19.4 million on the back of a 6.8% increase in sales. For yield-hungry investors perhaps the only blemish on the results was that the dividend was only raised by 5% to 15.75 cents per share.

The double-digit growth in earnings on the back of a single-digit increase in sales highlights the leverage inherent in InvoCare's business model.  Earnings growth was driven by an uptrend in funeral volume, a trend which is expected to increase substantially in coming decades in the key Australian and New Zealand markets.

Now what: Management commented that InvoCare's market share has remained relatively flat since December 2013 but was down on the previous corresponding period. Management highlighted eight initiatives it is undertaking to address its market share decline which included the opening of three new locations over the past year.

Too late to buy?

Investors are expecting a strong second half with the group forecast (according to Morningstar's consensus data) to earn 42.4 cents per share for the full year to December. If InvoCare hits this number it implies the stock is currently trading on a price-to-earnings multiple of 27.6. This is a high quality and defensive business with decent growth prospects and all these factors do arguably mean InvoCare deserves to trade on a premium to the market average. However, the current premium is also arguably excessive.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »