The management team at PLC has done an excellent job at targeting acquisitions and expanding its EBITDA over the past several years. Its business model is centered around targeting independent, owner-operated businesses and it has done an excellent job at expanding its market share over time. Its valuation has declined to 13X forward earnings from a peak of ~32X in 2020. Its share price and valuation have declined largely for two reasons; the first is that investors are concerned about its business model being highly acquisitive in a rising interest rate environment, and the second is that it has faced near-term headwinds amidst a declining mortality rate. Management notes that the declining death rate is set to normalize and expects this is not a lost customer, but rather a deferred customer. If and when interest rates peak, we expect to see PLC regain some of its historical valuation multiples, and we continue to like the name fundamentally.
It has some near-term headwinds, but management is capable of navigating this turbulence and has done an excellent job at expanding margins. We would be comfortable holding PLC here.