The Blackmores Limited (ASX: BKL) share price has been a particularly positive performer over the last month.
Since this time in October, the health supplements company’s shares have risen an impressive 18%.
Why is the Blackmores share price up 18% in a month?
Investors have been buying the company’s shares over the last few weeks following the release of its annual general meeting update.
That update revealed that Blackmores is on course to end its downturn and deliver profit growth in FY 2021. Though, management did explain that this profit growth would come predominantly from the second half of the financial year.
Another positive that went down well with investors was comments on its cost savings. Blackmores revealed that its restructuring is set to deliver $15 million of gross annualised savings from the second half.
In addition to this, further savings of $10 million have been identified in relation to its cost of goods sold.
Is it too late to buy Blackmores shares?
According to one leading broker, the Blackmores share price may be fully valued now.
A note out of Goldman Sachs reveals that its analysts have put a neutral rating and $75.40 price target on this company’s shares. This compares to the current Blackmores share price of $76.78.
While the broker is positive on the company’s outlook, it has a neutral rating on its shares for valuation reasons.
Goldman explained: “We revise earnings forecasts in the ANZ and China region based on the positive progress towards the cost savings and turnaround strategies as well as the more supportive high frequency data from e-commerce. We revise FY21 and FY22 EBIT [earnings before interest and tax] forecasts by +11.4% and +9.4%, respectively, based on these changes, but less materially by +1.7% in FY23.”
This means EBIT of $53.3 million in FY 2021 and then $70.9 million in FY 2022.
“Our revised 12-month Target Price is A$75.40, offering a [then] total return of +2.1%. While we note positive progress on multiple fronts, we believe that the ability to secure a partner in China and successful execution in new markets like India are outstanding risks for the firm. BKL trades at a +55% premium to the ASX200 on a P/E basis vs. historical average of +37%. We maintain a Neutral rating on BKL,” it concluded.
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Motley Fool contributor James Mickleboro 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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