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How Does Blackmores Limited’s (ASX:BKL) Earnings Growth Stack Up Against Industry Performance?

For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Blackmores Limited’s (ASX:BKL) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.

See our latest analysis for Blackmores

Were BKL’s earnings stronger than its past performances and the industry?

BKL’s trailing twelve-month earnings (from 30 June 2018) of AU$70.0m has jumped 18.6% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 19.9%, indicating the rate at which BKL is growing has slowed down. Why could this be happening? Well, let’s look at what’s transpiring with margins and if the whole industry is experiencing the hit as well.

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In the last few years, revenue growth has been lagging behind which indicates that Blackmores’s bottom line has been propelled by unsustainable cost-reductions.

Inspecting growth from a sector-level, the Australian personal products industry has been growing its average earnings by double-digit 26.8% over the past year, and 34.8% over the past five. Since the Personal Products sector in AU is relatively small, I’ve included similar companies in the wider region in order to get a better idea of the growth, which is a median of profitable companies of companies such as Eagle Health Holdings, Trilogy International and BWX. This means that any uplift the industry is deriving benefit from, Blackmores has not been able to leverage it as much as its industry peers.

ASX:BKL Income Statement Export September 12th 18
ASX:BKL Income Statement Export September 12th 18

In terms of returns from investment, Blackmores has invested its equity funds well leading to a 35.8% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15.9% exceeds the AU Personal Products industry of 10.3%, indicating Blackmores has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Blackmores’s debt level, has declined over the past 3 years from 38.7% to 35.6%.

What does this mean?

Though Blackmores’s past data is helpful, it is only one aspect of my investment thesis. While Blackmores has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Blackmores to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for BKL’s future growth? Take a look at our free research report of analyst consensus for BKL’s outlook.

  2. Financial Health: Are BKL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2018. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.