Ryan Modesto Park Lawn Corp PLC-T PAST TOP PICK Feb 26, 2020

Recent earnings very favorable. Turning the business around. Good time to buy at current share price. Selling legacy assets. Demand for healthcare not going away. Good for long term investors.

EPS of $0.3256 beat estimates of $0.3065 and revenues of $117.38M beat estimates of $113.08M. Management is overall pleased with its results given the decrease in call volume due to a declining death rate. It continues to gain market share and sales grew by 8.2%, driven mostly by acquired operations. PLC plans on divesting certain legacy assets to Everstory Acquisition Portfolio, a transaction valued at $70M. This divestiture is expected to reduce PLC's leverage ratio and provide cash for deployment into high-growth markets. Its balance sheet slightly expanded for the quarter, and sales grew, but its margins declined due to increasing interest expenses and cost of sales. It has made some progress on its debt load, but its net debt/EBITDA ratio remains high at 3.9X. We feel it is a well-run business, and in a better market backdrop it will perform well. Its high debt load is certainly acting as a drag on its financial performance, and we feel a recovery is likely once interest rates peak or decline.
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They grow by acquisition, because funeral homes are a very fragmented business. However, high interest rates make those buys expensive.

Pandemic pulled a lot of services forward, shares got ahead of themselves. Grows by acquisition, and M&A has slowed due to interest rates. She looks for organic growth in her companies.

Defensive business that is a good long term hold. Nature of fatalities means business is not going away. Would recommend holding. Scores 8/10 fundamentally. Believes 50% upside if bought at lows. 

Has traded stock in the past. In a "down trend" right now. Does not own shares currently. Wait to buy once the "down trend" has stopped (share price starts to rise). 

He likes the business but not the stock, Share counts have gone way up so the financials per share are not great. There are better opportunities.

Recession-proof with high barriers to entry. Great managers. Revenues surged from the higher death rates during Covid, and they entered the TSX. But the stock then plunged given rough YOY comps, investors got nervous over an acquisition, and they got kicked out of the TSX. Now, it trades cheaply at 8x EBITDA and are buying back shares. They just sold a lower-margin price at a good price, so margins will grow. Expect more acquisitions.

Cut in half since added to the TSX. Pandemic death rates have normalized now. Management team's focused on increasing sales and margins, accretive acquisitions. Seasoned management team. Sold some low-margin assets, paid down debt, balance sheet in good shape. Good buy here. Demographic tailwinds.

Taken out at 62% premium to last trading price. Shows how undervalued many small- and mid-caps are on the TSX. Over 18 years, he's had ~45 takeovers in his portfolio.