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Blackmores Limited (ASX:BKL) shares tumble lower on first quarter update

Credit: Blackmores

The Blackmores Limited (ASX: BKL) share price has dropped lower in morning trade following the release of a first quarter update ahead of its annual general meeting.

At the time of writing the health supplements company’s shares are down 4.5% to $120.80.

Here is a summary of how Blackmores performed in the first quarter compared to the prior corresponding period:

  • Revenue increased 15% to $154 million.
  • EBITDA lifted 11% to $27.05 million.
  • Net profit after tax climbed 7% to $16.5 million.
  • Blackmores remains the number one brand in Australia with a 17.5% market share.
  • Outlook is for continued growth for the full year.

Overall, I felt this was a solid but unspectacular first quarter from Blackmores.

Management advised that the top line growth reflected strong volume growth across the business with solid performances in both Australia and Asia.

The highlight for me was its domestic performance. Management advised that strong demand resulted in Australian sales growing 19% during the quarter.

CEO Richard Henfrey advised that “this was supported by our successful ‘Move’ campaign, a strong media presence, new product launches and lower stock-in-trade levels at the beginning of the quarter.”

Supporting this growth was its China business. Blackmores reported China in-country sales growth of 30% during the quarter. Successful promotions on Chinese ecommerce platforms such as Kaola and Tmall helped underpin this growth.

Elsewhere, other strong results include Hong Kong sales growing 59%, Taiwan sales increasing 167%, and Korea sales lifting 76%.

And finally, the company’s BioCeuticals business continued its positive run and saw sales grow 13% during the quarter.

Should you invest?

Based on its current growth rate, I estimate that Blackmores’ shares are changing hands at around 27x forwards earnings.

This does seem a little expensive given the level of its profit growth during this quarter and the impact that rising bond yields in the United States are having on valuations.

In light of this, although I see it as a great long-term investment, it may be best to wait and see if its shares come back to a more attractive entry level in the coming months.

In the meantime, investors might want to focus on growth shares trading on lower earnings multiples such as Aristocrat Leisure Limited (ASX: ALL) and Helloworld Travel Ltd (ASX: HLO).

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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. 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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