The InvoCare Limited (ASX: IVC) share price is in the red on Thursday, down 1.52% to $11.05 in lunchtime trade.
Although down 30% in the last year, the InvoCare share price soared 11% higher over the past 2 weeks, from a 52 week low of $10.10 on Jan 3, 2019, to close at $11.22 on Wednesday.
Could the InvoCare share price turn around?
2018 wasn’t as smooth sailing for Australia’s largest funeral operator as it may have foreseen
At the UBS Investor Conference, held in November 2018, Martin Earp – CEO of InvoCare, restated the October trading update that the number of deaths over the winter period was down approximately 6%, further adding that every 1% decline in deaths equates to a $3 million loss in revenue for the funeral business. Any further weakness in the funeral case volume for H2 is expected to impact the bottom line.
Despite the negative exposure, InvoCare’s ’Protect and Grow’ plan, designed to respond to changing customer needs, saw the company continue to grow its market share.
Between March 2018 and September 2018, InvoCare acquired eight funeral parlours in Australia and three in New Zealand. The acquisitions account for another 2,080 and 1,730 funeral cases in respective countries.
Presently, InvoCare has an estimated market share of 5% in regional/rural areas and 32% in metropolitan areas.
Amid growing competition in the funeral industry, InvoCare’s management undertook research to understand the needs of their customers, highlighting the key issue that it’s not necessarily the price of the funeral but rather the experience and level of service offered that will determine which provider they choose.
Hence, refurbishing work is currently on-going to inject a modern look, feel and experience into InvoCare’s 221 funeral locations. Work is expected to be fully completed by end 2020.
Life is unpredictable, but when tragedy happens, InvoCare has a chance to benefit. While many investors may avoid this taboo stock, it is one I would like to own because it’s an undying business.
Based on the current price, InvoCare’s price to earnings is 15.49 times as compared to the industry at 19.19.
Reflecting on a quote by Warren Buffet’s Berkshire Hathaway partner, Charlie Munger,
“A great business at a fair price is superior to a fair business at a great price.”
I believe this is an opportunity to add another great business to my retirement portfolio.
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Motley Fool contributor Ivan Loh has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. The Motley Fool Australia has recommended Brickworks and 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.