Supplements producer Blackmores Limited (ASX: BKL) will tomorrow reports its financial results for the six months to 31 December 2014 and analysts are expecting a bumper 50% rise in earnings per share.
Blackmores?
For those that don't know Blackmores, the company produces and markets vitamins and mineral nutritional supplements for people and animals in Australia, New Zealand and Asia.
Blackmores is the dominant brand in the slow-growing Australia and New Zealand markets, but Asia represents a massive growth opportunity for the company if the increasingly wealthy middle class accepts quality supplements in a similar manner.
What to Expect
Blackmores updated the market in mid-January about what to expect from the first half results. The updated forecast was well above what analysts expected and resulted in the share price jumping from $34 to $41 in just one day.
Blackmores is expected to report a 22% jump in revenue to $206 million, and a 50% jump in net profit after tax, compared to the previous corresponding period. This would imply net profit of $18.2 million, most likely driven by stronger sales in Asia and a gradual improvement in Australian conditions.
For the full year, analysts are expecting net profit to come in at around $35 million, representing earnings per share of 204 cents, and a dividend payout of 170 cents for a corresponding yield of nearly 4%. If Blackmores can achieve these results it will represent a 38% rise on last financial year!
Based on the full-year forecast, Blackmores is trading on a forward price to earnings ratio of 21, which is reasonable for a company growing profit at 38% per year, however analysts are only predicting an 8% rise in 2016.
Too Expensive?
Unless Blackmores predicts a stronger-than-expected outlook, I would consider that paying 21x forward earnings for the company appears a little expensive.
