MENU

Why InvoCare Limited shares are shooting higher today

One of the best performers on the local market in morning trade has been the InvoCare Limited (ASX: IVC) share price.

The funerals company’s shares were up as much as 5.5% at one stage but have faded slightly and sit 4.5% higher at $12.38 at the time of writing.

What happened?

With no news out of the company, today’s gain is likely to be attributable to a broker note out of Citi.

According to the note, the broker has upgraded InvoCare’s shares from a sell rating to a buy rating with an improved price target of $14.00.

This price target implies potential upside of over 13% for its shares over the next 12 months.

Why is Citi bullish on the funerals company?

Although the broker has been bearish on the company this year, it has had a change of heart and appears confident that its Protect and Growth strategy can deliver on its goals.

Protect and Growth is a $200 million capital expenditure plan which aims to deliver sustainable double digit EPS growth. To achieve this, the plan incorporates both defensive spend to protect existing market position and growth capex to drive market share increases.

In addition to being positive on Protect and Growth, the broker believes that InvoCare’s current valuation is too low.

Based on the broker’s earnings per share forecasts of 55.8 cents in FY 2018 and 59.1 cents in FY 2019, InvoCare’s shares are changing hands at 22x full-year earnings and 21x FY 2019 earnings.

These forecasts are notably higher than what the rest of the market is predicting and is expected to be driven by cost savings, an expanding presence in rural areas, and stronger case growth.

Should you invest?

While Citi could prove to be spot on here, I think investors would be better off waiting until the release of its full-year results to see how the Protect and Growth strategy is tracking.

Especially with short interest rising fast. At the start of the week, data from ASIC revealed that around 11% of its shares were held short. This put it on the verge of entering the top ten of Australia’s most shorted shares.

Instead, I would suggest investors consider fellow defensive shares such as Bingo Industries Ltd (ASX: BIN) and Sydney Airport Holdings Pty Ltd (ASX:SYD).

Alternatively, these top blue chips To Buy In 2018  could be even better options.

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.