People will often refer to 'recession-proof' investments. Companies that can weather tough economic environments. Consumer staples, such as your supermarket giants and agricultural commodity providers, are often put into this category.
However, the following ASX All Ords share operates in an industry that is as dependable as it gets.
No matter the state of the economy, people will continue to pass away. It is a sad, but inevitable, fact of life. However, for an investor, a funeral service provider could offer a stable and consistent holding to their portfolio.
Personally, I believe Propel Funeral Partners Ltd (ASX: PFP) has huge growth potential in a timeless industry… and here's why.
Fragmented market ripe for consolidation
The funeral services industry is probably not discussed much due to the nature of the business. Let's be honest, it doesn't exactly make for the most cheerful of topics. Though, I tend to think — because of this — it is often overlooked as a worthwhile investment.
There are quite a few compelling tailwinds for the sector. Most notably, the industry is highly fractured — with the majority of funerals in Australia handled by small family-owned and operated service providers. Propel Funeral Partners estimates that around 71.3% of the market consists of these smaller businesses.
This provides a large opportunity for a fast-growing ASX All Ords share, such as Propel, to consolidate the industry. Its main competition is fellow ASX-listed funeral operator Invocare Limited (ASX: IVC), with a market share of 21.7%.
Given the sizeable domestic market opportunity, I believe Propel could continue to win market share and consolidate the industry. Already, the company has demonstrated a successful acquisition strategy. In six years, Propel has grown its revenue from $22.4 million to $145.2 million.
During FY22, the ASX All Ords constituent tallied up six acquisitions for a total of $21 million. Based on the company's available funding capacity of $136 million, it appears positioned to continue to grow its market share.
In my eyes, it seems the market is unwilling to expect the same level of growth from Propel as it has demonstrated in the past. I'm of the opinion that the management team will continue to execute its strategy.
How has this ASX All Ords share fared?
Over the last 12 months, this ASX All Ords share has far exceeded the market average return. Propel shares are up an impressive 17.9% during this time. Meanwhile, the S&P/ASX All Ordinaries Index (ASX: XAO) has tumbled 10%.
In my opinion, that's a pretty good example of how reliable this company can be. After all, it operates in a market where every single person uses its service — even if it's only once.
