One of the worst performers on the ASX 200 on Thursday has been the InvoCare Limited (ASX: IVC) share price.
The funeral company's shares fell almost 7.5% in early trade to a 52-week low of $10.12.
Why is the InvoCare share price crashing lower today?
With no news out of InvoCare today, this decline is likely to be attributable to a trading update out of rival Propel Funeral Partners Ltd (ASX: PFP).
Propel's update warned that continued weakness in funeral market conditions in Australia means that it expects operating net profit after tax to be in line with the prior corresponding period.
This weakness has been blamed on the funeral industry cycling through a strong prior corresponding period which included a severe flu season and below trend funeral volumes this year due to a benign flu season.
An example of this is the sharp decline in registered deaths in Tasmania so far in FY 2019.
According to Propel's figures, registered deaths in Tasmania from July 1 to November 30 have fallen by 17.9% on the prior corresponding period. This has led to a materially lower number of funerals being performed by Propel in the market and presumably it is the same for InvoCare.
Propel also warned that other key Australian markets have experienced material estimated death volume declines, with most relevant markets experiencing at least a 5% volume decline in FY 2019 compared to a year earlier.
This appears to have spooked InvoCare shareholders and led to them heading to the exits in their droves today.
What now?
One glimmer of hope for InvoCare is that history is on its side.
According to Propel's CEO, Albin Kurti, these tough trading conditions are expected to be temporary.
He said: "Historical experience suggests that the significant, year on year decline in death volumes we've seen in calendar year 2018 should be temporary, given the growing and ageing population, and prior year on year declines have rebounded quickly. When the rebound occurs, Propel will be well placed to benefit, given operating leverage within the business."
Should you buy the dip?
At 21x estimated forward earnings I don't see a lot of value in InvoCare's shares at these levels, especially given the tough trading conditions it is experiencing.
In light of this, I intend to stay clear of its shares until trading conditions are far more favourable. Until then I would sooner buy a share such as Cochlear Limited (ASX: COH) which I expect to benefit from ageing populations trend.
