This 1 Stock Could Have Huge Upside

Death is inevitable and Park Lawn Corporation (TSX:PLC) aims to capitalize on this. Let’s take a closer look.

| More on:

Eventually, everyone dies.

Yes, I know this is not the most enticing opening sentence, but perhaps the fact that Park Lawn’s (TSX:PLC) stock has increased 272% since its IPO will make up for that.

Now that I have your attention, allow me to dive into the nature of Park Lawn’s business. The company specializes in the disposition and memorialization of remains in Canada and the United States.

It is one of the leaders in this industry and generates most of its revenues from its business in the United States.

What makes Park Lawn such a good investment is two-fold. First, the company is engaged in an acquisition growth strategy. Second, the company’s latest round of financing was a bought deal for $190 million.

Business acquisitions

In FY 2018, the company made multiple acquisitions in Canada and the United States amounting to $275 million.

This includes Signature Funeral and Cemetery Investments, LLC, CMS Mid-Atlantic Inc. and Citadel Management LLC in the United States. In Canada, the company made acquisitions in BC and Ontario which helped to expand its presence.

So far in 2019, the company acquired Horan & McConaty Funeral Services, Inc. and The Baue Funeral Home Co. for a cash consideration of USD$101.5 million.

You may be wondering: what does this mean for investors?

As an investor, this is good news, as a company engaged in an acquisition-centric growth strategy is looking to quickly expand its business. This could lead to significant revenue growths and ultimately, a growth in net incomes.

Bought deal financing

In 2018 the company raised $190 million through a bought deal financing arrangement.

In finance, two of the main financing arrangements are bought deal and best efforts. Bought deal financing involves the underwriter purchasing the entire offering of shares and the onus is on it to sell.

With a best-efforts arrangement, the underwriter finds sellers to purchase shares but it is not obligated to sell all of the shares.

Essentially, this means that the financial institution that worked with Park Lawn is confident in the company and its ability to stick around. If this wasn’t the case, it wouldn’t jeopardize its reputation and money.

Bottom line

Park Lawn is a solid company with lots of upside potential. The company’s stock increased 272% since its IPO and there is clear indication that it will continue to increase.

Park Lawn’s competitive advantage is two-fold. First, the company is engaged in an acquisition-centric growth strategy, which means that investors should expect rapid growth from the company in the near future.

Second, the company recently completed a $190 million bought deal financing. Since financial institutions wouldn’t jeopardize its risk and money for a lackluster company, the fact it assumed all the risk indicates that Park Lawn is a solid company.

Given North America’s aging population, there will be increasing demand for Park Lawn’s services. Its acquisition strategy means that it’s likely that clients will find themselves in one of Park Lawn’s many businesses.

Simply put, this is a solid company amid a growing industry.

If you liked this article, click the link below for exclusive insight.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chen Liu has no position in any of the stocks mentioned.

More on Investing

GettyImages-1352607170 (1)
Tech Stocks

Why Shopify Stock Is Skyrocketing Today

Shopify published its Q3 report this morning, and it gave investors plenty to be excited about.

Read more »

Hand Protecting Senior Couple
Dividend Stocks

3 Blue-Chip Stocks So Safe Canadians Can Hold Them Until They Die

Canadian National Railway (TSX:CNR) is a stock worth owning for life.

Read more »

stock research, analyze data
Dividend Stocks

14.7% Dividend Yield? Buy Up This Passive-Income Stock in Bulk!

That dividend yield is high, but it still comes with some strong reasons to consider the stock outside of a…

Read more »

calculate and analyze stock
Stock Market

Chewy vs. Pet Valu: Which Growth Stock Is a Better Buy?

Chewy and Pet Valu are two beaten-down pet stocks that trade at a reasonable valuation in November 2024.

Read more »

Forklift in a warehouse
Investing

Canadian Industrial Stocks to Buy Now

Canadian industrial stocks offer a comprehensive variety of safety, dividend, and growth combinations. This ensures that all kinds of investors…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Tuesday, November 12

Sliding metals prices amid a strengthening U.S. dollar could continue to weigh on TSX mining stocks today.

Read more »

rising arrow with flames
Investing

2 TSX Stocks With Market-Beating Potential

Fairfax Financial Holdings (TSX:FFH) stock has been soaring of late but remains cheap from a valuation perspective.

Read more »

Canadian Dollars bills
Dividend Stocks

1 Dividend Stock That Could Create $5,000 in Tax-Free Passive Income in 10 Years

Here's why Fortis (TSX:FTS) certainly looks like a top dividend stock with outsized total return upside worth buying right now.

Read more »