The Blackmores Limited (ASX: BKL) share price has been on a bumpy ride in 2020 but could it be a cheap buy near its 52-week low?
What does Blackmores do?
Blackmores is an Aussie vitamins and nutritional supplements business with a market capitalisation of more than $1 billion. The group’s product range spans a wide variety of markets including arthritis, digestive health, cold and flu, infant nutrition and women’s health.
Blackmores has extensive operations across Australia, New Zealand and Asia with a strong sales channel to China.
How has the Blackmores share price performed?
2020 has been something of a rollercoaster for shareholders. The company’s share price climbed to a new 52-week high of $95.68 in February before crashing lower in the March bear market.
Coronavirus concerns weighed on the company’s value as investors worried about supply chain issues and reduced sales.
Those fears were somewhat realised in August when Blackmores released its full-year earnings result.
The company posted a 3% decline in revenue from FY19 to $568 million. Softer earnings flowed through to the bottom line with net profit after tax slumping 66% to $18.1 million.
That net profit figure was at the lower end of the company’s guidance range as China sales fell 16% to $103 million. Australia and New Zealand sales were also down 15% to $227 million as COVID-19 hit inventories and regulatory challenges weighed on the company.
Is the Blackmores share price a buy?
I think Blackmores is an interesting share to buy right now. The Blackmores share price is trading at $61.64 per share, down 64.4% from its 52-week high and just above its 52-week low.
However, the group’s price to earnings (P/E) ratio is 71.2 right now which could make it a touch overvalued.
I also think there are a couple of concerns for earnings growth in the next 6 to 12 months. The first is the heavy reliance on China, with increasing trade tensions on a range of Aussie goods.
There’s also the strong Aussie dollar which may hurt a net exporter like Blackmores into offshore markets.
However, a focus on health and wellbeing alongside the retreat of regulatory concerns may be enough to propel the Blackmores share price higher in 2021.
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Motley Fool contributor Ken Hall 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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