Australian And New Zealand Demographics Will Elevate Funeral Sector

Key Takeaways

• Demographic trends and strategic acquisitions position Propel for steady long-term growth in revenue, market share, and operational efficiency.
  
• Strong balance sheet and scalable operations enable continued expansion, higher earnings margins, and sustained cash flow generation.
  
• Overdependence on acquisitions, regional concentration, and shifting consumer trends threaten margins, earnings stability, and long-term growth if business adaptation and risk diversification do not improve.

Catalysts

Provides death care services in Australia and New Zealand.

• Accelerating demographic trends-specifically the forecasted increase in the death rate in Australia and New Zealand-are expected to drive a multi-year uplift in industry funeral volumes, supporting consistent long-term revenue and operating earnings growth for Propel.
  
• Continued acquisition of independent funeral homes and crematoriums within a highly fragmented market positions Propel to expand market share and leverage operational synergies, leading to further top-line growth and potential net margin expansion.
  
• Ongoing increases in average revenue per funeral, supported by both inflation-linked price growth and consumer willingness to pay for premium, more personalized services, is likely to support higher overall revenues and gradual improvement in earnings margins.
  
• Propel's scalable business model and investment in infrastructure (including property ownership and digital platforms) facilitates operational efficiency, with consistently high cash conversion rates pointing to sustained strong cash flows and improved net profit margins.
  
• The company's robust balance sheet, low leverage, and significant available funding capacity provide Propel with ample flexibility to pursue additional growth initiatives and acquisitions, which are likely to positively impact both future revenue and long-term earnings.

Propel Funeral Partners Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Propel Funeral Partners's revenue will grow by 5.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.0% today to 10.7% in 3 years time.
• Analysts expect earnings to reach A$28.6 million (and earnings per share of A$0.19) by about August 2028, up from A$20.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 35.0x on those 2028 earnings, up from 34.2x today. This future PE is greater than the current PE for the AU Consumer Services industry at 16.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.15%, as per the Simply Wall St company report.

Propel Funeral Partners Future Earnings Per Share Growth

Risks

• Propel's heavy reliance on acquisitions to drive growth increases integration risks and the chance of overpaying for assets, especially in a period where acquisition activity has slowed; if future acquisitions fail to materialize or are less accretive, it may lead to slower inorganic revenue growth and lower net margins.
  
• The funeral industry is experiencing volatile and, at times, contracting death volumes (notably a 3% contraction in the second half of FY25), indicating that long-term demographic tailwinds may be offset by unpredictable fluctuations, which could depress future revenue and earnings.
  
• Recent acquisitions are trading at lower margins, particularly those in New Zealand, which, combined with an expanding property base, could result in margin dilution and drag on group-level earnings performance, especially if further acquisitions follow the same trend.
  
• Geographic concentration in Australia and New Zealand exposes Propel to localized demographic, regulatory, or economic shocks and limits the company's ability to diversify risk, which may increase earnings volatility and cap long-term revenue growth compared to globally diversified peers.
  
• Shifting consumer preferences toward alternative, direct, or digital funeral services risks underutilization of Propel's large network of brick-and-mortar funeral homes and crematoria, potentially leading to lower fixed asset returns and margin compression if the company cannot adapt to changing demand patterns.

Valuation

• The analysts have a consensus price target of A$5.907 for Propel Funeral Partners based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$6.5, and the most bearish reporting a price target of just A$5.7.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$268.3 million, earnings will come to A$28.6 million, and it would be trading on a PE ratio of 35.0x, assuming you use a discount rate of 7.1%.
  
• Given the current share price of A$5.05, the analyst price target of A$5.91 is 14.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.