Are Blackmores Limited shares in the buy zone?

In afternoon trade the Blackmores Limited (ASX: BKL) share price is on course to finish the day with a 1% decline to $117.23.

This will mean the health supplements’ company’s shares have fallen around 8% during the last two weeks.

Why have Blackmores’ shares sunk lower?

Blackmores’ shares have been heading lower since the release of its third quarter results late last month.

Although the company’s 8.2% increase in quarterly invoiced sales on the prior corresponding period to $188 million was largely in line with expectations, the same cannot be said for its earnings.

Blackmores’ achieved earnings before interest and tax of $25.2 million during the third quarter, up a solid 17.6% on the prior corresponding period but below the market’s lofty expectations.

According to Goldman Sachs, the blame for its earnings miss can be placed on higher than expected promotional activity during the quarter which included 50% off on its popular fish oil range.

The good news is that management has advised that these promotional activities are now over and have led to market share gains in the Australian market.

This has left Blackmores as the clear number one brand in Australia in both total market and domestic sales, possibly making this a case of short term pain for long-term gain.

Elsewhere, investors appear to have been a little underwhelmed with the company’s performance in the China market. Management admitted that sales in the lucrative market were below expectations during the quarter.

Though this is due mainly to the impact of supply challenges and some disruption due to customer trading term re-negotiations. Pleasingly, management is confident that the fourth quarter will be stronger.

Should you invest?

While the third quarter performance was clearly below expectations, I think the selloff that ensued has left its shares trading at an attractive level for patient investors.

Based on Goldman Sach’s earnings estimates of $4.08 per share in FY 2018 and $4.68 per share in FY 2019, Blackmores’ shares are currently changing hands at approximately 25x FY 2019 earnings.

I don’t think this is overly expensive for a company with such strong long-term growth potential.

In light of this, I would put it up there with the likes of A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL) as growth shares to consider right now.

Looking for even more options? Here are three more growth shares to consider.

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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 Blackmores 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.

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