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Why the BWX share price has rocketed 183% higher in 2019

The BWX Ltd (ASX: BWX) share price is pushing higher again on Tuesday.

In afternoon trade the personal care products company’s shares are up 1.5% to $4.48. This latest gain means that BWX’s shares are now up a remarkable 183% in 2019.

This makes it one of the best performers on the All Ordinaries index this year alongside the likes of Opthea Ltd (ASX: OPT) and Zip Co Ltd (ASX: Z1P).

Why is the BWX share price up 183% in 2019?

Investors have been scrambling to buy the company’s shares this year after a dramatic turnaround in its fortunes.

Due largely to a disastrous performance in the first half of FY 2019, BWX reported a 0.5% increase in net revenue to $149.5 million and a 50% decline in net profit after tax to $9.5 million in FY 2019.

A key driver of its underperformance was its key Sukin brand. Sales of Sukin products fell 20% to $52.8 million in FY 2019 due to non-repeating unprofitable promotions and the stabilisation of stock levels.

However, sales improved greatly in the second half. This led to total sales growing 19.5% in the second half versus the first half.

FY 2020 guidance.

Pleasingly, this momentum is expected to carry over into FY 2020. As a result, management has provided very positive earnings growth guidance for the current financial year.

Management expects to deliver revenue growth of 20% to 25% and EBITDA growth of between 25% to 35% in FY 2020. This implies revenue of $179.5 million to $187 million and EBITDA of ~$26.5 million $29 million.

Is it too late to invest?

Based on its guidance I estimate that BWX’s shares are changing hands at 37x FY 2020 earnings.

Whilst this is expensive, if the company can deliver and then build on its guidance for this year, its shares could still be in the buy zone.

However, I think investors ought to wait for its half year results before considering an investment. Its previous fall from grace was very sudden, so I’d like to see proof that things are different this time around before picking up shares at this premium.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended BWX 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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