A new life cycle for this death care company

24 June 2022

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The company featured in this report is one of the leading death care companies in Western Europe. Once a darling of investors with its stock rising almost tenfold, management problems subsequently made the share price drop by 90%.

Following a change in leadership, the company is now heading towards a normalisation from 2023. Assuming it returns to its pre-crisis profitability, the stock would have a price/earnings ratio of about 4. This figure does not even incorporate the future growth potential now that the company has a competent, forward-looking management in place. It also doesn't count the undervalued assets that it keeps on its balance sheet, such as hundreds of residential properties, quite a few of which can be sold off.

The stock price is currently too low by a factor of 2-3, at least.

The second half of 2022 should bring not one, but two or three catalysts for a re-rating of the stock. This should be followed by many years of growth, increasing market share, and increasing profitability. As such, this stock could do what the price of its American counterpart (Service Corporation International) has done during the past decade, when it rose fivefold.

At a later stage, a bidder for the entire company is likely to appear on stage, as has already happened for comparable companies in other European countries.

This is a stock that combines value and growth in an interesting way. It's listed on one of Europe's largest stock exchanges and is currently going through a sell-off (like the rest of the market). The resulting current price level would then prove a lucky entry point.

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