Blackmores Limited (ASX: BKL) saw its share price close at $200.72, up 0.7% today, the first time the shares have closed above the $200 mark.
The share price also hit an all-time high of $204 in intraday trading today.
As you can see from the price chart below, shares in the vitamins and supplements supplier have soared in recent times, up more than 500% in the past year, and 1,266% over the past decade. Since 1988, the share price is up a whopping 19,575% according to Yahoo Finance (not including dividends).
Demand for the company's products has soared, particularly from China, with reports that much of the product sold in Australian retail stores ends up shipped to China. Sales have been rocketing along, up a stonking 65% in the three months to end of September 2015 to $162.2 million, while net profit jumped 161% to $22.6 million compared to the previous corresponding quarter. In the last financial year, net profit soared 83% to $46.6 million compared to the previous year.
Blackmores says sales through Australian retailers were up 76%, driven by sales to Chinese tourists and entrepreneurs.
There's now a whole new cohort of people buying products in Australian stores and selling them at greatly marked up prices in China and on Chinese auction sites.
Asian sales now represent 50% of Group sales, but sales excluding China were also up 18%, suggesting demand for the company's products in Asia is strong.
The company also announced a partnership with Bega Cheese Ltd (ASX: BGA) to develop and manufacture a range of nutritional foods including high-quality infant formula. Bega's subsidiary Tatura also manufactures baby formula for Bellamy's Limited (ASX: BAL).
Blackmores' shares are currently trading on a trailing P/E of 74x earnings, but that's not that meaningful for a company generating the sort of growth it has recently reported.
Analysts are forecasting the company to generate earnings per share of around $4.70 in the 2016 financial year for a P/E ratio of 42.7x. Again, that might not be meaningful if Blackmores can continue generating such explosive growth. 2 years of such growth equates to a P/E ratio of just 24.4x, showing how quickly it can fall if earnings continue growing so fast. key to that will be if the company can get a high-quality baby formula product to market quickly.
Foolish takeaway
It might be tempting to buy into Blackmores now, but investors need to be aware that such strong growth will inevitably invite competitors into the sector, which could harm Blackmores' sales and margins (like Blackmores attracted by growth in Bellamy's baby food sales). Good luck to those investors that have held on for a few years, I for one wouldn't be selling out just yet.
