Is the InvoCare Limited (ASX: IVC) share price a buy?
InvoCare director Ms Jacqueline McArthur certainly seemed to think so as she indirectly doubled her family's InvoCare holdings to 4,000 shares with an on-market purchase earlier this week.
The average purchase price for those shares was $15.52 per share, so just over $31,000 was spent on the shares. This isn't enough to move the market, but I think it's interesting that this week was the time chosen to make the trade.
The funeral operator's share price has performed strongly since the start of the year, it has risen by 50%. Some of the gain was due to the share market recovering, but quite a bit of the share price performance is down to a resurgence of performance by InvoCare.
A benign flu season combined with InvoCare's refurbishment and upgrade program saw the funeral operator's revenue and profit take a large hit in 2018.
But in the 2019 first quarter trading update InvoCare showed that gross sales revenue increased by 7.8%, operating earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 22.2% and operating earnings after tax grew by 9%.
The "soft market conditions" have started to improve and the number of deaths is reverting to the long-term trend of growth.
When you combine all that with the additional impact of the 2018 acquisitions, it's easy to see why the share price has done so well this year.
The long-term thesis for InvoCare seems to be intact, 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.
Foolish takeaway
InvoCare is currently trading at 27x FY20's estimated earnings with a grossed-up dividend yield of 3.4%.
The funeral business has a good long-term future ahead, but I'm not sure if InvoCare is good value today. The best time to buy it was a few months ago when the funeral market was suffering.
