Yahoo Finance Should You Invest In The Consumer Staples Stock Blackmores Limited (ASX:BKL)?
Blackmores Limited (ASX:BKL), a AU$2.62b small-cap, is a consumer staples company operating in an industry which has been a consistent performer over time, due to its robust consumer demand throughout economic cycles. Consumer staple analysts are forecasting for the entire industry, a positive double-digit growth of 19.4% in the upcoming year , and a whopping growth of 31.9% over the next couple of years. However this rate still came in below the growth rate of the Australian stock market as a whole. Today, I will analyse the industry outlook, and also determine whether Blackmores is a laggard or leader relative to its consumer staples sector peers.
View our latest analysis for Blackmores
What’s the catalyst for Blackmores’s sector growth?
The personal product market growth has been driven predominantly by factors such as innovative and eco-friendly design, shifting demographics and consumer tastes, as well as the e-commerce channels influencing sales. In the previous year, the industry endured negative growth of -16.8%, underperforming the Australian market growth of 10.7%. Blackmores also endured some headwinds, though to a lesser extent, delivering delivering a negative earnings growth of -0.5% over the past year. However, analysts are expecting its future earnings growth to be more in-line with the industry average, hovering at 19.4% over the next couple of years.
Is Blackmores and the sector relatively cheap?
The personal product sector’s PE is currently hovering around 16.43x, in-line with the Australian stock market PE of 17.99x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 16.2% compared to the market’s 11.8%, potentially illustrative of past tailwinds. On the stock-level, Blackmores is trading at a higher PE ratio of 40.43x, making it more expensive than the average personal products stock. In terms of returns, Blackmores generated 36.4% in the past year, which is 20.2% over the personal products sector.
Next Steps:
Blackmores’s future growth prospect aligns with that of the broader market, however its relative value seems to be above the rest of the industry. This could indicate the price is reflective of factors other than growth. If Blackmores has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other consumer staples companies. If you’re looking for growth, it seems other industry peers are also delivering the same rate. However, before you make a decision on the stock, I suggest you look at Blackmores’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has BKL’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Blackmores? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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.
