They say those who deal in birth and death will never go out of business, and funeral home, cemetery and crematoria company InvoCare Limited (ASX: IVC) certainly has a stronghold on the market related to the latter.
The $1.3 billion market cap company operates across Australia, New Zealand and Singapore, with key brands including well-known White Lady Funerals and Simplicity Funerals.
We break down 3 compelling reasons why InvoCare Limited is a good share to have in your portfolio, and why pressing the buy button might be a good idea.
- Portfolio Diversification
All good share portfolios are diversified and while most investors turn to commodity and big bank blue chips for long-term buy and hold prospects, the likes of InvoCare should be on your list of possibilities when you're seeking out a business with strong fundamentals and good growth prospects.
Elsewhere in the sector the likes of small cap Propel Funerals Partners Ltd (ASX: PFP) are trying to make a name for themselves, but InvoCare is not only retaining its market share, but attempting to swallow its competitors with a strategy to broaden its geographical scope.
- Citi brokers back it
Citi analysts have swooped in on InvoCare this week and upgraded its rating to buy from sell with the broker hopeful the company's $200 million Protect and Growth plan will deliver the goods when FY18 results flow in.
InvoCare announced its Protect and Growth plan in February 2017 as a way of delivering sustainable double-digit EPS growth.
Citi improved its price target on the stock from $13.50 to $14 to accompany the upgrade, with confidence InvoCare's strategy to expand into regional areas via the process of acquisitions was a solid one to have in the pipeline.
The regional expansion process has begun with one acquisition of Dunns Funerals in Launceston in the first-quarter.
Second-half performance is expected to be stronger due to an increase in case average. Singapore operations will have gained momentum and the impact of newly refurbished locations will begin to bear fruit.
- It's in bargain territory
The InvoCare share price has seen a bit of a surge in the last few days, up 1.6% to $12.68 at the time of writing, but it's still sitting well down from its November 2017 high of $17.98, and below its $15.13 share price at this time last year.
The InvoCare share price fell sharply of the back of revised FY18 guidances. After announcing its refurbishment of 221 funeral locations via Protect and Grow, the company hit a 52-week low earlier this month.
While the price has improved since then InvoCare is well-below the 200-period or longer term moving average so even though its share price is having a bit of a rally at present, I would argue there's still a bargain to be nabbed in the short term if you're quick.
InvoCare was sitting among the top S&P/ASX200 gains list yesterday with a 5.1% jump in share price during May 16 trade, alongside the likes of Whitehaven Coal Ltd (ASX: WHC) who sat at the top of the gains – up 6.8% and Domino's Pizza Enterprises Ltd (ASX: DMP) – up 4.2%.
Foolish Takeaway
I'd be inclined to buy in sooner, rather than later, while the price is still fair, but most interested investors will at least wait to see what comes out of the InvoCare AGM tomorrow, with its interim report due in mid-August.
