The Blackmores Limited (ASX: BKL) share price has come under enormous pressure over the past month. During that time, the Blackmores share price has decreased more than 17%, slipping to just $88.55 today.
Between 2014 and early 2016, it seemed Blackmores could do no wrong. The company’s sales and earnings were both experiencing staggering growth, in large part due to growing demand from China.
However, regulatory concerns in China began to mount, and sales growth began to slow during the third quarter of financial year 2016 (FY16). They then declined 2% during the fourth quarter, and another 20% in the three months that followed.
Although sales have improved again in the time since, it appears that the days of Blackmores’ hyper growth could be over. When the company updated the market on the results for its latest quarter in April, it said (my emphasis):
“The Board expects the full year profit will represent good growth on the 2015 financial year, recognising that 2016 was an exceptional performance that we will not match. We remain confident in the Group’s strategic focus and growth prospects.”
Also, as was reported by The Australian Financial Review this morning, investors may also be concerned about the level of discounting across the vitamins sector which could impact Blackmores’ profitability going forward.
Although there are certainly risks associated with an investment in Blackmores, however, it could at least be worth keeping an eye on the business at its current share price, and particularly if it continues to fall from here.
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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Bruce Jackson.
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