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Could the BWX Limited share price head higher?

Shares in BWX Limited (ASX: BWX) as the owner of Australia’s most popular natural skincare brand in Sukin have climbed 44% over the course of 2017 as the company continues to grow sales at strong rates.

Founded in 2007 in Melbourne the group has successfully tapped into demand for natural skincare at very affordable prices which has carved it a successful niche market with most natural skincare competitors retailing products at far higher price points.

As a consequence its sales growth has presented beautifully to investors with revenues and net profit up 36.4% and 30.2% respectively for the half-year ending December 31 2016.

Australian sales grew a rocketing 49% over the prior half as the company’s distribution networks widen, with forecasts for more growth for the half-year ending June 30 2017.

Importantly, the founder-led group is also lifting gross profit margins by manufacturing more of its products itself as the company scales larger with its growing sales.

While Australia is its core market it also has some hefty potential to excel in the large UK market thanks to distribution deals it has struck with the UK’s largest pharmacy in Boots and its most popular natural healthcare retailer in Holland & Barrett. Both the UK agreements hold some big potential and their success or otherwise is likely to influence the direction of the share price over the short term at least.

Sukin is also moving into the US and Canada and selling its products on Chinese e-commerce websites such as Tmall.com and JD.com under the advertising banner of “Australia’s #1 selling natural skincare brand”.

Despite all the information around the strong sales growth being publicly available last Christmas investors were able to pick up shares for less than $4 after the stock was sold off over regulatory concerns with the likes of other Chinese-consumer facing businesses such as Bellamy’s Australia Ltd (ASX: BAL), Blackmores Limited (ASX: BKL) and Capilano Honey Ltd (ASX: CZZ).

Just back in March I noted how BWX shares still looked good value at $4.47, although they have now gone on to sell for $5.88 just a couple of months later as the market wakes up to the company’s potential in Australia, the UK and potentially even China.

For now I would rate the stock as a hold given its fruity valuation and fact that the company trades in a very competitive sector against powerful pharmaceutical giants as rivals.

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Motley Fool contributor Tom Richardson owns shares of Blackmores Limited and BWX Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of BWX Limited and Capilano Honey 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 Bruce Jackson.

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