You Could Have Made 29% In A Week With Bellamy’s (ASX:BAL) Shares

Bellamy’s Australia Ltd (ASX: BAL) shares have gained 29% in just a week.

Bellamy’s is an ASX-listed organic infant formula and organic food company that was founded in 2004 in Launceston, Tasmania. It was the first company to offer an organic infant milk formula range to Australian mothers. It is now becoming a growing presence in the large Chinese market.

Why Bellamy’s shares are going so well

In the past week Bellamy’s shares may be up 29%, but since the start of 2019 it’s up 38.6%.

The organic infant formula company reported its result right at the end of reporting season, so it wasn’t until just over a week ago that investors got their chance to react to the numbers.

On the face of it the numbers weren’t actually great. Revenue fell by 16% to $127.7 million.

Reported EBITDA declined by 60% to $14 million, although ‘normalised’ EBITDA only fell by 25.5% to $26 million (click here to learn what EBITDA means).

Reported net profit after tax (NPAT) dropped by 64% to $8.1 million and ‘normalised’ net profit dropped 26.4% to $16.5 million.

Bellamy’s explained that the result was impacted by a number of different factors including delayed State Administration for Market Regulation (SAMR) registration, a planned reduction in trade inventory prior to the rebrand and an observed slowdown in the performance of the industry.

Bellamy’s said that it expects a return to stronger performance of its business from March with revenue for FY19 predicted to be between $275 million to $300 million and an EBITDA margin of 18% to 22%.

Apart from short sellers looking to cover their positions, investors were probably pleased to read that that company retains high confidence in its rebrand, continued food growth and getting a successful SAMR registration.

Indeed, Bellamy’s CEO Andrew Cohen said: “The Board and Management Team remain strong believers in the medium-term outlook, and the ability to evolve Bellamy’s from Australia’s #1 organic brand, to Australia’s #1 organic portfolio.”

Is Bellamy’s a buy?

After such a strong run this month I would be hesitant to buy shares with so much momentum occurring at the moment. But, once the company gets its SAMR registration there may be further positive reaction.

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