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InvoCare Limited (ASX:IVC) continues its acquisition streak

The InvoCare Limited (ASX: IVC) share price has risen by another 2% this morning after announcing another acquisition to the market.

The market-leading funeral business has announced that it has entered into a conditional sale agreement to buy Lester & Son in Albury-Wodonga, which should complete this month.

Lester & Son is a well-established operator performing around 460 funerals and 200 cremations per annum, it generates around $3.5 million of revenue annually according to InvoCare. It has operated in the region for more than 110 years and is a trusted name.

InvoCare re-iterated that this is part of its strategy to expand in regional markets, this buy means it is acquiring the leading funeral business on the New South Wales & Victoria border.

The purchase comes with two funeral homes with mortuaries and it also has a separate crematorium facility.

InvoCare’s CEO and Managing Director, Martin Earp, said “Lester & Son provides us with an exciting opportunity to build on our regional strategy by providing us with significant access to a highly attractive market through a well-recognised and market-leading brand.

“The Lester & Son team have established a strong business in the area and we are delighted to have the opportunity to build on their success in Albury-Wodonga and surrounding areas. We warmly welcome the team and the local community into our business.”

Is InvoCare a buy?

InvoCare is one of my favourite long-term growth ideas. Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050. This isn’t a rocket for InvoCare, but it could lead to slow-and-steady gains.

A significant amount of the shares on issue are shorted. On 26 June 2018, nearly 11% of shares were shorted according to ASIC. The lower-than-expected death rate this year and the company’s investment strategy could cause the share price to fall after it reports next month.

However, after the short-term uncertainty is known in the report, I think InvoCare would be an excellent ultra-long-term buy. It’s currently trading at 24x FY19’s estimated earnings.

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Motley Fool contributor Tristan Harrison owns shares of InvoCare Limited. The Motley Fool Australia has recommended InvoCare 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.

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