The Blackmores Limited (ASX: BKL) share price has had a bad year so far, down 42.5% since January. Yikes!

Who is Blackmores?

Blackmores describes itself as Australia’s leading natural health company. Maurice Blackmore founded the company in the 1930s. Blackmores has a number of different brands, not just the well-recognised Blackmores brand. It operates BioCeuticals, the Blackmores Institute, Fusion Health & Oriental Botanicals, Impromy, IsoWhey and Pure Animal Wellbeing (PAW).

Here are two reasons I think the shares are still worth watching…

1. The Products

The first reason I like Blackmores shares is because of the products they sell. Blackmores, through its extensive vitamins range, has established itself as the leading player in multiple markets, giving the company a distinct competitive advantage.

In the FY19 annual report, Blackmores reported that it is the number-one vitamin brand in Australia, Thailand, Singapore and Malaysia. When most Australians think of vitamins, Blackmores is the first company to come to mind and that’s powerful in terms of pricing and loyalty.

Sustainable competitive advantages are reflected in a company’s return on equity (ROE) and return on capital (ROC). Blackmores has for some time consistently had an ROE above 25%, suggesting the competitive advantage is alive and well.

Blackmores looks set to maintain this competitive advantage, with 142 new products released during FY19.

2. Growth Prospects In Asia

Much of the reason for the declining share price has been regulatory changes in China that impacted sales in FY19, with total China revenue down 15% to $122 million. However, in-country sales increased 22% and Blackmores still looks set to take advantage of Chinese growth over the longer term.

Also, as much as some analysts would have you believe, China is not the only country in Asia. In fact, Blackmores saw sales from other Asian countries increase by 30% in FY19 to reach $107 million, which is not far off total revenue from China.

As the leading vitamins brand in three Asian countries, I believe Blackmores will continue to see strong growth in Asia, even if Chinese sales have been impacted by regulatory changes.

Buy, Hold Or Sell

I’m not sure yet if Blackmores is a buy at its current price, but with shares 42.5% cheaper than in January and the outlook still reasonably positive, it’s certainly worth a closer look.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.