Blackmores share price down 30% in 6 months: Is now the time to buy?

Blackmores Limited (ASX: BKL) share price hasn't had a great year, but does that put it in the buy zone?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Blackmores Limited (ASX: BKL) share price closed at $96.70 on Friday afternoon, down 30.08% in the last 6 months.

The company achieved exponential success between 2014 – 2016 due to demand from Chinese consumers, but this growth driver has waned.

Is now the time to buy Blackmores shares?

Blackmores is an Australian natural health company that sells vitamins, herbs, minerals and nutrients. Recently, it's been facing an uphill battle in a market with heavily discounted products.

The company reported a flat 0.4% increase in net profit after tax of $34.3 million in its HY report, and management doesn't expect any improvement for the second half. This is disappointing as Blackmores traditionally delivers stronger returns in the latter half of the year.

While its interim profits remained flat, the company's main competitor skyrocketed ahead. Swisse sales grew a whopping 63% in China, while Blackmores slowed from 30% in the first quarter to -14% in the second. This was due to having expanded distribution in China too rapidly without an apt sell-through rate.

To top it off, former CEO Richard Henfrey, resigned just 18 months into his role after Blackmores' poor interim results which drove the share price down 25%.

However, leadership updates announced earlier this week sparked some investor confidence as Marcus Blackmore takes up the reins. Following the announcement, the share price peaked at $100.01 on Tuesday before falling back down to $95.45 at close on Thursday. Mr Blackmore stated that he hopes a permanent CEO will be in position by EOFY.

Foolish Takeaway

Heading into its HY earnings call, analysts anticipated FY net profit after tax to be $77 million. Had this been the case Blackmores would've had a P/E ratio of over 30x rather than its current 23.9x multiple. Nevertheless, the company is still priced for growth.

Before buying, I want to see more evidence of how the company will get 'lean and mean' – as Mr Blackmore describes it. Given that its main rival, Swisse, is dominating the market that Blackmores had achieved explosive growth in, I'd keep this one on hold.

I'll be waiting for further announcements post-EOFY to see (1) who's in the driving seat and (2) if the company demonstrates a new market strategy for China or any new revenue channels.

Motley Fool contributor Audrey Thehamihardja has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »

Father in the ocean with his daughters, symbolising passive income.
Dividend Investing

I'd spend $8k on these ASX 200 shares today to target a $6,102 annual passive income

I believe these ASX 200 shares will continue rewarding passive income investors for years to come.

Read more »

Three businesspeople leap high with the CBD in the background.
Share Market News

Boom! ASX 200 blasts to new record highs

ASX 200 investors just sent the benchmark index into uncharted territory.

Read more »