It hasn't been a great time to be a shareholder of Brambles Limited (ASX: BXB). Since the middle of August the share price of the supply chain logistics company has fallen 15%, compared to a 4.5% decline in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
A significant portion of this decline has come in the last month following the release of its first quarter trading update.
For the first three months of FY 2017 Brambles reported sales revenue from continuing operations of US$1,420.1 million. This represented a 5% increase on the prior corresponding period.
This led management to forecast full year revenue growth from continuing operations of 7% to 9%, with underlying profit expected to be between US$1,055 million and US$1,075 million.
Although this reflects growth of 9% to 11%, investors didn't appear to be impressed by the projections that management provided.
As the operator of the world's largest pallet pool, Brambles does provide investors with defensive qualities. But that is still not enough in my opinion to justify its shares changing hands at over 21x full year earnings.
In order for its shares to command a premium of that level over the market average I believe earnings growth would need to be far higher than current forecasts.
So at this point in time I wouldn't yet class Brambles as being a bargain buy. It might be worth keeping a close eye on the company though. If the current downtrend that its share price has been experiencing continues, it won't be long until it reaches a level that makes it attractive again.
In the meantime I would sooner gain exposure to the logistics industry through an investment in WiseTech Global Ltd (ASX: WTC).
WiseTech is a leading provider of software solutions to the logistics industry globally and has far brighter growth prospects than Brambles in my opinion.
