Unfortunately for its shareholders, the Blackmores Limited (ASX: BKL) share price has had a year to forget.
Since the start of 2018 the health supplements company's shares have fallen a sizeable 27%.
Why is the Blackmores share price down 27% in 2018?
The main driver of its share price decline in 2018 has been its disappointing result in FY 2018.
In FY 2018 the company posted a 9% lift in revenue to $601 million and a 19% increase in net profit after tax to $70 million.
While this may look strong on paper, it was lower than the market's expectations and not strong enough to justify the sky-high multiples that Blackmores' shares were trading at.
For example, even now after its 27% decline this year, the company's shares are still priced at over 30x trailing earnings.
This is still a bit rich for analysts at Citi. According to a note out of the investment bank last month, it initiated coverage on the company with a sell rating and $100.00 price target.
According to the note, the broker is concerned that Blackmores may need to ramp up its investment in marketing in order to compete with rival Swisse. This could impact its profitability in the short term.
One broker that doesn't agree with this is Macquarie. Last month it initiated coverage on the company with an outperform rating and $150.00 price target. The broker believes Blackmores is well positioned in the lucrative China market.
Should you buy the dip?
Whilst I think that Blackmores' shares are trading at about fair value now for a patient buy and hold investment, I see greater value elsewhere in the sector with the likes of A2 Milk Company Ltd (ASX: A2M), Bellamy's Australia Ltd (ASX: BAL), and Treasury Wine Estates Ltd (ASX: TWE) shares.
In light of this, I would choose these shares ahead of Blackmores until it offers a more compelling risk/reward.
