Seeking Alpha opines on Park Lawn Corporation

June 15, 2022/Finance/

Last Friday when Funeral Director Daily published an article entitled “Is it time to buy funeral home stocks” unknown to us Seeking Alpha author Mat Litalien was publishing an article about Park Lawn Corporation. It was entitled “Death and Taxes” and gives a synopsis of Park Lawn Corporation and he concludes his article by saying “For a stock like Park Lawn, management’s track record is an important factor in the company’s future success and the future looks bright for Park Lawn“.

While Funeral Director Daily gives no recommendation here are some of the pros and cons (as quoted) of Litalien’s thinking:

Pros:

“There is probably no (Canadian public) company better positioned to take advantage of the aging population.”
“Park Lawn scored in the top quarterly percentile for growth and valuation. Where it came up short was in its dividend ranking”.
“The company has an aggressive growth through acquisition strategy”.
“The company’s debt-to-equity ratio is only 20% and it generates ample cash from operations to cover its debt obligations”.
“It has a clear growth strategy: EBITDA growth will be achieved through Acquisitions (75-80%), Organic Growth (10-12%), and Margin Expansion (7-8%)”.
“Given the fragmented nature of the industry and its ability to execute, there is no reason to doubt the company will achieve its growth targets”.

Cons:

“(Park Lawn) is a small cap and as such is subject to greater volatility. A miss on quarterly earnings or revenue can have a big impact on the company’s share price”.
“. . .achieving synergy through acquisitions is one of the riskiest growth strategies. Why? Because synergy is tough to quantify. There are countless examples whereby acquisitions did not deliver on the expected synergies. For a company like Park Lawn who qualifies as a serial acquirer, execution is of the utmost importance. It is even more important for a small cap like Park Lawn. Even small mistakes can lead to a significant impact on the company’s bottom line”.

You can read the entire Seeking Alpha article here.

Funeral Director Daily take: Again, we offer no suggestion as to the value of the stock. One of the things I found interesting was the “clear growth strategy” of Park Lawn Corporation which takes into effect acquisitions, organic or internal growth, and margin expansion. It got me thinking, that while I never expressed it in writing or thinking, that is the same way that I increased the value of my single funeral home operation.

As you move forward in your own business world with your funeral home maybe it makes sense to sit down and think of your growth strategy.

Are there businesses in your sphere of operation that you could acquire and add to your operations?
How can you fuel organic growth? Can you build numbers via impressive service, pricing options, or increasing preneed marketing and results?
Can you get a margin expansion on services in this day and age when clientele is moving from traditional to cremation to direct cremation services? I’ve recently seen some pretty hefty price increases in small community funeral homes – especially for cremation with memorial services — and some operators have told me that there is no resistance to those increases as long as they provide exceptional services. Quite frankly, at least one funeral home I visited with has cremation with a memorial service prices at about 83% of their traditional casketed service prices. . . . .and there is no embalming or prep work required.

In any regard, acquisitions, organic growth, and margin expansion would all seem to be a way to build enterprise value to your operation.

Disclaimer-– The author of this article holds a position in Park Lawn Corporation stock.

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