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The InvoCare share price is up nearly 50% since Christmas. Is it time to buy?

The InvoCare Limited (ASX: IVC) share price is trading at $15.05 at the time of writing, which is its highest level in over a year and seems to be marching towards its all-time high of $17.75 – reached in November 2017.

If you were lucky enough to pick up shares in December last year, when they hit $10.22, you would be looking at a gain of almost 50% in four months (not including the April 12 dividend).

What does InvoCare do?

InvoCare is the largest funeral and funeral services provider in Australia and has a significant presence in New Zealand and Singapore. The company operates 290 funeral parlours and 16 cemeteries and crematoria across these countries. InvoCare employ over 1,800 people and have a turnover of around $400 million a year, with a market cap of $1.76 billion. Using its household-name brands such as White Lady Funerals, Simplicity Funerals and Whitestone Funerals (New Zealand), InvoCare has managed to establish significant market dominance in what is otherwise a highly decentralised industry.

The foundation of InvoCare’s cash flow is death rates (a bit morbid, I know!) and the company expects deaths in Australia to increase at a rate of almost 3% annually by 2034. InvoCare has also been concentrating on expanding into regional markets, where they currently hold a 5% market share (as opposed to their 32% share in metropolitan areas). Another key focus for the company is ensuring that InvoCare remains abreast of consumer trends and preferences when it comes to funeral arrangements (preferences for ‘celebration of life’ type funerals, for example), which I think is a positive sign for the company’s future.

Is InvoCare’s share price in the buy zone?

I like InvoCare’s business model – death is one of the few certainties in life and funerals are something that customers do not mind opening their wallets for, regardless of the economic cycle. I think at this late stage of the cycle that we seem to be currently in, defensive shares like InvoCare are very much in-vogue for investors nervous about the near-term future of the stock market.

Charlie Munger – Vice-Chairman at Berkshire Hathaway (and Warren Buffet’s right-hand man) says that “no company, no matter how wonderful, is worth an infinite price”. On the current share price, InvoCare has a Price to Earnings ratio of 40.35 and a Price to Book ratio of 9.5. This indicates, to me, that the market is disagreeing with Mr. Munger and I won’t be joining in that fool’s errand (not the good kind of Fool) anytime soon.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. 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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