Propel Funeral Partners (ASX:PFP): A Contrarian Play on Death and Dividends?

The funeral industry isn’t exactly a sector that gets investors’ hearts racing—unless you’re a contrarian looking for hidden value. Propel Funeral Partners (ASX:PFP), Australia’s second-largest funeral services provider, has been quietly growing its revenue and dividends, but its stock price has lagged behind. Are these returns finally turning a corner? Let’s dig into the data.

The Numbers: Revenue Growth, Margin Struggles, and a Dividend Lift

Propel’s First Half 2025 results are a mixed bag of 12% revenue growth to AU$115.2 million and a 42% surge in net income to AU$11.8 million. Earnings per share (EPS) jumped to AU$0.085, a 21% increase over last year, while cash flow conversion hit 96%, proving the business is liquid. But here’s the catch: operating costs rose AU$6.7 million, mostly due to acquisitions and executive pay hikes, squeezing margins by 60 basis points.

The dividend, however, is a bright spot. PFP hiked its interim payout to AU$0.074 per share, a fully franked dividend that’s 5% higher than last year. Management claims this payout is sustainable, but analysts are skeptical: the dividend yield of 2.9% is “not well covered by earnings,” according to Simply Wall St. If profits can’t keep up, this could be a ticking time bomb.

The Stock: A Funeral for Bulls?

Despite strong earnings, the stock has been a graveyard for momentum investors. Over the past year, PFP’s shares fell 7.99%, closing at AU$5.18 in March 2025. Even after April’s two acquisitions—Twentymans Funeral Directors and Richmond Funeral Home—the stock dipped another 4.1%, closing April at AU$5.20.

Analysts are lukewarm, forecasting a year-end price of AU$5.12. Meanwhile, the company’s valuation looks frothy: at AU$710 million market cap, it’s 22% overvalued compared to intrinsic models. That’s a problem for investors counting on growth to justify the price tag.

The Case for Hope—and the Risks

The Bull Case:
- Demographic tailwind: Australia’s aging population (17% of the population is over 65) guarantees funeral demand.
- Acquisition machine: PFP has completed 59 deals since 2013, and its pipeline remains robust. The strategy has worked—organic funeral volumes grew 1% in H1 2025.
- Margin upside: Once new acquisitions are integrated, lower revenue-per-funeral drag (due to cheaper NZD and lower-margin businesses) could reverse.

The Bear Case:
- CEO succession: Albin Kurti’s retirement after 14 years risks disrupting strategy, even if the board picks an internal leader.
- Margin pressure: New businesses are weighing on margins, and the EBITDA dip shows execution risks.
- Valuation reality: At 22% overvalued, investors are pricing in perfection.

The Bottom Line: A Buy for Contrarians, but Beware the Graveyard

Propel Funeral Partners isn’t a high-flying tech stock, but its fundamentals are improving. Revenue growth is real, cash flow is strong, and the dividend hike is a sign of confidence. However, investors must confront the overvaluation warning, margin headwinds, and leadership uncertainty.

Final Call:
If you can stomach the volatility and believe in PFP’s acquisition playbook, PFP is a buy below AU$5.00—a 4% dip from current levels—to create a margin of safety. But if you’re buying at AU$5.20, you’re paying a premium for a company still fighting to prove its margins can expand. For now, the returns are improving, but the stock’s performance isn’t. Wait for a pullback before digging in.

Final Stats to Remember:
- Revenue Growth: 12% YoY (H1 2025)
- Dividend Yield: 2.9% (vs. 2.3% in 2024)
- Analyst Forecast: AU$5.12 by year-end (down from recent closes)

This is a stock for those who see value in the grim reaper’s portfolio—but only at the right price.