The Dignity share price is soaring! Should I buy today?

Dignity’s share price has lifted off after announcing sweeping changes to the way it does business. Is now the right time for me to buy?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image of person checking their shares portfolio on mobile phone and computer

Image source: Getty Images.

The Dignity (LSE: DTY) share price is rising strongly again on Thursday. At 751p per share, the UK business is up 4% from last night’s close. It had struck its most expensive for two-and-a-half years earlier today above 792p. And it’s up more than 200% over the past 12 months.

But should I buy this UK share today?

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Dignity plans huge changes

The funeral services provider has soared over the past couple of days after laying out a new trading strategy. Dignity said it was tearing up contracts with five of its telephony partners which it deemed as “uneconomical” and also “not representative of the high standards we would expect.”

This would hit funeral revenues by 35% in 2021, it said, though this would be “largely mitigated” through cost savings.

The company also said it plans to prioritise investment “into standards of care [and] facilities and our estate,” while it will also spend on “a combination of a competitive pricing and product mix, cultural change and stronger branding.” Dignity hopes these plans will give it a 20% share of the funerals market in 10 years, up from 12% right now.

Across its other operations, Dignity plans to increasing both volumes and yield per crematoria by increasing throughput and growing ancillary sales. Increasing capacity at existing crematoria and continuing to build its pipeline of new facilities are also on the agenda. It also plans to “[embrace] direct cremation and become price leaders for the location agnostic value segment of the market.”

Profits drop at the UK share

In other news, Dignity said underlying operating profit during the 21 weeks to 21 May clocked in at £30.7m. This was down fractionally from the corresponding period last year. The UK share said this was because of lower deaths in the period, though higher average revenues helped offset the decline.

So where do I stand on the Dignity share price? Well, it’s said that death and taxes are the two certainties in life. And, theoretically, this should make this one of the most stable stocks out there, regardless of broader economic conditions.

That said, I won’t be investing my hard-earned cash in Dignity today. The overhauls it’s announced this week reflect the growing pressure it faces from the Competition and Markets Authority (CMA). A multi-year investigation by the regulator has recommended better price transparency along with the introduction of an industry inspector.

Too much risk

What’s more, in last October’s report, the CMA floated the idea of another market investigation being launched when conditions get back to normal following the Covid-19 crisis. Measures to cap funeral costs remain a real possibility that Dignity may have to tackle later down the line.

Today, the funerals giant trades on a forward price-to-earnings (P/E) ratio of 16 times. It’s a reading that isn’t cheap enough to tempt me to invest, given these risks. I’d rather buy other UK shares for my stocks portfolio today.

Indeed, I’d rather ignore Dignity and buy this top growth share identified by The Motley Fool's team of expert stock finders

One FTSE “Snowball Stock” With Runaway Revenues

Looking for new share ideas?

Grab this FREE report now.

Inside, you discover one FTSE company with a runaway snowball of profits.

From 2015-2019…

  • Revenues increased 38.6%.
  • Its net income went up 19.7 times!
  • Since 2012, revenues from regular users have almost DOUBLED

The opportunity here really is astounding.

In fact, one of its own board members recently snapped up 25,000 shares using their own money...

So why sit on the side lines a minute longer?

You could have the full details on this company right now.

Grab your free report – while it’s online.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

A Rolls-Royce employee works on an engine
Investing Articles

In penny stock territory, is the Rolls-Royce share price set to soar?

The Rolls-Royce share price has sunk recently, falling into penny stock territory. But with flying hours recovering, is it too…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Lloyds shares drop 20% in 4 months. Should I buy now?

Lloyds shares have lost a fifth of their value since peaking on 17 January this year. But after rebounding from…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

As the stock market recovery stalls, should I wait to buy?

Has the stock market recovery run out of steam? If so, what does that mean for our writer's portfolio? Here…

Read more »

Diagonal chain made of zeros and ones. Cryptocurrency and mining.
Investing Articles

At 55p, is the Argo Blockchain (LON:ARB) share price too cheap to miss?

With a low P/E ratio and strong financial results, could the Bitcoin miner be good value for money?

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Here are 2 recession-proof FTSE stocks!

In the face of current economic uncertainty and fears of a looming recession, this Fool identifies two recession-proof FTSE stocks.

Read more »

British Pennies on a Pound Note
Investing Articles

Here is 1 penny stock primed to benefit from the construction boom!

Jabran Khan delves deeper into a penny stock that he believes could benefit from the construction boom, and explains why…

Read more »

Various denominations of notes in a pile
Investing Articles

Here is 1 top passive income stock to buy and hold!

Jabran Khan wants to boost his passive income stream through dividends and has identified this insurance giant as a way…

Read more »

Cheerful young businesspeople with laptop working in office
Investing Articles

These are the 5 worst ways to invest in stocks

It's all too easy to lose money when you don't really know how to invest in stocks. Here are the…

Read more »