The a2 Milk Company Ltd (ASX: A2M) share price has grown tremendously over the past five years, delivering multibagger returns for long-run investors.

a2 Milk Share Price V. All Ordinaries (XAO)

a2-milk-a2m-asx-a2m-share-price
Source: Google Finance

The a2 Milk Company is one of Australia and New Zealand’s largest infant formula producers and the leader in a2-only protein-based dairy products. It has operations in New Zealand, Australia and China thanks to key supply and distribution agreements with the likes of Synlait Milk (ASX: SM1).

What Analysts Think Of A2 Milk Company

According to The Wall Street Journal 12 analysts cover a2 Milk shares in detail. Of the 12, five have a hold rating, four rate the shares as a buy and three say sell.

The even spread of views might give you a hint at what the ‘average’ valuation provided by the analysts…

The analysts’ average intrinsic valuation is $14.04, which is less than 5% more than the current a2 Milk share price. That’s not enough for most value-conscious investors to have a reliable ‘margin of safety’ and say definitely if it’s good value.

Valuation & Share Prices – Knowing The Difference

Warren Buffett famously said the price is what you pay, the value is what you get.

For investors who know what they are doing, share valuation is far more important to generating significant long-term returns than share price.

What makes it tricky is simply taking another investor or analyst’s valuation and running with it is dangerous because the valuation is based on a set of assumptions made by him or her. For example, to get to an a2 Milk valuation of $14 could use unrealistic expectations or fail to appreciate the supply-side risks, as we saw when Bellamy’s Australia Ltd (ASX: BAL) pushed too much supply into the Chinese market.

This free video series from Rask Finance explains valuation in great detail:

Buy, Hold or Sell

As can be seen in the share price chart above, growth shares like a2 Milk can be great. But, they can also extremely risky, so it’s vital to go into an investment with your wits about you. Focus on the potential risks and rewards.

If you’re considering buying a2 Milk shares we suggest taking a look at other similar, fast-growth ASX companies before taking the plunge. In the free report below we’ve identified two of our favourite ASX shares that might be just at the start of their growth runways — it could be like buying a2 Milk shares five years ago.

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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).