Questor: Buy Dignity – the market is overstating the threat to earnings from competitors – Telegraph.co.uk

This post was originally published on this site

Suggestions that Dignity, the funeral services firm, is in poor health look wide of the mark to this column.

A share price plunge late last year could therefore provide patient, contrarian investors with an opportunity to take a stake in the second biggest operator in a field where (regrettably) demand looks guaranteed.

On the face of it, November’s third-quarter trading update was perfectly respectable. The company turned a 1pc increase in deaths into a 6pc rise in sales and a 5pc improvement in underlying operating profit. Mike McCollum, the chief executive, also left full-year profits guidance for 2017 unchanged.

However, his guarded comments about rising price competition from new entrants in what remains an unregulated industry upset the market and drove the shares sharply lower. Dignity is calling for regulation to ensure that rivals meet minimum standards and to oversee funeral plan…