Park Lawn Corp (PLC-T)

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. 

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.

They grow by acquisition, because funeral homes are a very fragmented business. However, high interest rates make those buys expensive.

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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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.

Is a long term shareholder of the company. Will continue to own shares. Risk of economy faltering may put pressure on company. Higher interest rates not a major concern for company. Skilled at capital allocation. Good time to buy at current share price. 

It has an excellent management team based in the U.S. and focusing on organic growth as well as M&A.. It has very good tailwinds with an aging population. Has high margins along with high barriers to entry. At 8 1/2X EBITDA it is at an all-time low and he is adding to his position/

Growth through M&A. 
Organic growth not strong enough to justify investment.
Would not recommend buying. 

PLC reported revenue of $85.3 million, up 12.4% year-over-year, missing estimates of $86.5 million. Adjusted EBITDA of $18.8 million rose 21% year-over-year but missed estimates of $19.7 million. EBITDA margin rose from 20.6% in the second quarter of 2022 to 22.1% in the recent quarter. Adjusted earnings per share of $0.22 came in line with estimates and rose 16.8% year-over-year. Mortality rates in the US are declining, or more normalizing after the rates during the pandemic years. The second quarter cyclically is the weaker quarter for the company. A competitor revised down 2023 guidance by 3% for EPS citing lower pre-need cemetery sales and higher borrowing costs. We don't think this quarter had any major takeaways and continue liking the name for the long-term. We would be fine starting a position. 
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Recession proof, high barriers to entry, strong demographic tailwinds. Pullback is a fantastic entry point. Trades at 16x earnings, a big discount to SCI. Possible joint venture with BAM to acquire the #3 US player. Any interest by Brookfield is an endorsement.

We continue to like PLC for its growth potential and it could accelerate its growth via more acquisitions. Analysts expect marginal sales and earnings growth for this year, but higher growth in future years. Its valuation has come down to reasonable levels, at a 15.9X forward earnings multiple. It generates positive free cash flows, issues a yield, and has recently been repurchasing shares. Its balance sheet has been growing over the years, its valuation is the cheapest it has been in over a decade, and we feel that these low price levels will not last forever. We continue to like the name at these prices. 
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The macro tailwind is there with aging demographics. But his main issue is them diluting shares. Also, their returns on capital aren't high enough. A decent, but not outstanding company.

Great company, industry, and management team. Enormous tailwinds from aging demographics. #2 player in North America, but still has only 2% of the market, which is hugely fragmented. Consolidating and growing organically.  Very compelling valuation. Growing faster than SCI, which has 20% of the market. Great long-term hold.

Even though it has sold off and its PE is lower now at 10x and the balance sheet is good, the problem is its still pricey at 22x and growing at only 8%. A good name, but doesn't love it.

Death and taxes are inevitable in life, so why not invest in funeral homes? But every time he looks at PLC they are buying more properties and running it debt--which is too high for him