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BWX Ltd (ASX:BWX) share price falls to a 52-week low: Is it a bargain buy?

On Friday the BWX Ltd (ASX: BWX) share price sank 4% lower and hit a 52-week low of $4.38.

This has been quite a turnaround for the company behind the Sukin skincare range.

Just over four months ago BWX’s shares were trading at an all-time high of $8.19, now they have almost halved in value and have short interest rising fast.

As I mentioned earlier, approximately 10.5% of the personal care company’s shares are now in the hands of short sellers.

What happened?

The BWX selloff began in February when the company reported a disappointingly weak half-year result. But more importantly, it hinted that the acquisition spree the company had been on was not going as well as expected.

Considering the lofty multiples that its shares were trading on, any slightly disappointing numbers were always going to be punished. One need only look at A2 Milk Company Ltd (ASX: A2M) and its stellar, but not quite stellar enough, sales growth guidance given last week as an example of how quickly sentiment can change.

Should you be buying the dip?

BWX’s management has forecast FY 2018 EBITDA in the range of $42 million to $46 million. I expect this to translate into earnings per share of about 22 cents.

Based on this estimate, BWX’s shares are changing hands at about 20x full-year earnings now, compared to 37x earnings back in February.

While at this level I think it is an attractive price for investors to consider snapping up shares, in light of the rising short interest, I think the prudent thing to do at this point might be to wait for it to report its earnings or provide a trading update first.

Until then, investors might want to consider growth shares such as Aristocrat Leisure Limited (ASX: ALL) or Blackmores Limited (ASX: BKL). I think these two shares are great options for those willing to make patient buy and hold investments.

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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 and 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.

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