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People will often refer to “recession proof” investment. Companies able to withstand difficult economic conditions. This category often includes consumer staples like your giant supermarkets and agricultural suppliers.
However, the following ASX All Ords share is operating in an industry that is as reliable as possible.
Regardless of the state of the economy, people will continue to die. This is a sad but unavoidable fact of life. However, for the investor, a funeral service provider can offer a steady and stable portfolio.
Personally, I believe Propel Funeral Partners Ltd (ASX: PFP) has huge growth potential in the timeless industry… and here’s why.
A fragmented market is ripe for consolidation
The funeral service industry is probably not discussed much because of the nature of the business. Let’s be honest, this is not exactly a fun topic. Although I tend to think – because of this – it’s often overlooked as a worthwhile investment.
There are many compelling tailwinds for the sector. Notably, the industry is highly fragmented – most funerals in Australia are carried out by small, family-run providers. Propel Funeral Partners estimates that about 71.3% of the market is made up of these smaller businesses.
This presents great opportunities for a fast-growing ASX All Ords stock such as Propel to consolidate the industry. Its main competition is an ASX-listed funeral operator Invocare Limited Company (ASX: IVC), with a market share of 21.7%.
Given the significant domestic market opportunity, I believe Propel can continue to gain market share and consolidate the industry. The company has already demonstrated success acquisition strategy. In six years, Propel grew revenue from $22.4 million to $145.2 million.
During 22 fiscal year, the ASX All Ords component tallied six acquisitions totaling $21 million. Based on the company’s $136 million in available funding, it looks like it can continue to grow its market share.
It seems to me that the market is unwilling to expect the same level of growth from Propel that it has shown in the past. I believe that management will continue to implement its strategy.
How has this ASX All Ords action performed?
This ASX All Ords stock has significantly outperformed the market average over the past 12 months. During that time, Propel shares have risen by an impressive 17.9%. Meanwhile, S&P/ASX All Ordinary Companies Index (ASX: XAO) fell 10%.
In my opinion, this is a good example of how reliable this company can be. After all, he works in a market where everyone uses his services — even if it’s just once.