Unfortunately for its shareholders the BWX Ltd (ASX: BWX) share price has been one of the worst performers on the All Ordinaries (Index: ^AXAO) (ASX: XAO) so far in 2018.
Since the turn of the year the personal care products company’s shares have lost approximately 34% of their value.
Investors have been heading to the exits in their droves after the company behind the Sukin skincare brand posted a weaker-than-expected half-year result.
As well as posting slower-than-expected growth during the first-half, the company revealed a few teething issues with its acquisitions. This appears to have spooked the market and led to concerns over its future growth prospects.
But one broker that hasn’t been spooked is Goldman Sachs. This morning the broker not only retained its conviction buy rating, it increased the price target on BWX’s shares to a massive $8.25.
This means upside of over 65% for its shares over the next 12 months if they reach the broker’s lofty price target.
Although the broker concedes that BWX’s first-half result was weak, it believes its original investment thesis is intact. That thesis was essentially that there is strong global demand for natural/organic products and BWX has an attractively priced product portfolio.
The reason the broker has upgraded its price target is due to its upward revision to BWX’s future earnings growth on the back of stronger growth forecasts for Sukin International, higher gross margins, a lower tax rate, and lower net debt estimates.
All in all, Goldman believes this will lead to BWX achieving earnings per share of 25 cents in FY 2018, 31 cents in FY 2019, and 40 cents in FY 2020.
Should you invest?
Based on Goldman’s forecasts BWX’s shares are changing hands at 20x estimated FY 2018 earnings and just 16x estimated FY 2019 earnings.
I think that this makes BWX a very attractive investment option after its post-earnings decline and believe investors ought to consider it.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia owns shares of A2 Milk. 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.