Shares of leading natural health product developer, Blackmores Limited (ASX: BKL), are trading mostly flat today despite the release of a positive quarterly profit result.
In an announcement to the ASX, Blackmores reported its results for the nine months ended 31 March 2015, showing a 28% jump in group sales to $326 million, and a net profit after tax of $31 million, up 76% over the prior corresponding period.
In its most recent quarter, net profit was an impressive 125% higher at $12.17 million.
In addition to 43% sales growth throughout Asia during the quarter, Blackmores Australia's year-to-date sales jumped 35%, boosted by strong pharmacy sales and demand from Chinese customers.
"The growing demand for Blackmores' high quality premium Australian products is reflected in our sales results," said the CEO Christine Holgate. "We have worked hard to significantly increase our inventory to minimise the impact on consumers when product lines are out of stock."
Given the strong demand, Ms Holgate told customers to contact Blackmores directly for assistance if their favourite products are out of stock.
The company says it's adapting to the increased sales rate, with 2.75 million units picked and shipped during March.
"These high volumes support improved recoveries of fixed costs and continue to benefit our cost of goods which can be seen in our improved earnings before interest and tax (EBIT) at $47 million for the nine months, up 67% compared to the prior corresponding period," today's announcement read.
Ms Holgate said the strong performance has also improved the group's cash and debt position, with interest costs down 38%.
Should you buy, hold, or sell Blackmores?
A couple of years ago if you were asked whether Blackmores was a good long-term investment you'd likely have said no because of competition from key rivals such as Swisse and the ongoing price war between Woolworths Limited (ASX: WOW) and Coles – owned by Wesfarmers Ltd (ASX: WES).
However Blackmores has clearly shrugged off those concerns with its shares rising 130% in the past year alone.
The gains might well prove justified too with Ms Holgate today saying "shareholders can expect the current year to date growth to continue and deliver a record full year profit for the Blackmores Group."
Unfortunately for new investors the company's shares may be fully valued at today's prices. Indeed its shares currently trade at 28x forecast profit per share. Therefore unless you believe Blackmores can continue to power profits higher with its Asian strategy in the medium term, it might be wise to keep it on your watchlist and hold off buying for now.
