If you thought you’d missed the boat on A2 Milk Company Ltd (ASX: A2M) shares, think again. Now could be the perfect time to buy.
The a2 Milk Company share price is down almost 30% after reaching an all-time high in July 2019. This could be an opportunity to buy into a quality high-growth company.
About The a2 Milk Company
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, USA and China thanks to crucial supply and distribution agreements.
Why The a2 Share Price Has Fallen
The a2 Milk share price has been on a downward trend recently due to the company missing analyst forecasts for growth in its FY19 results. While a2 Milk didn’t meet market expectations for FY19, the company still produced some impressive growth numbers for the year.
a2 Milk reported revenue increase of 41.4% to NZ$1.3 billion, EBITDA increase of 46.1% to NZ$414 million and net profit after tax (NPAT) increase of 47% to NZ$288 million.
However, the company’s EBITDA margin for FY20 is likely to fall slightly in FY20 due to its investing in growth and a growing marketing spend.
At its FY19 results presentation, a2 Milk also announced the intention to exit its UK liquid milk operations that commenced in 2012, which will be wound down over the first half of FY20. The company will instead focus on continuing to grow its market in China and the US, both of which provide greater opportunities for high revenue growth.
The Future
The growth rates of revenue and EBITDA are quite impressive for a2 Milk and are likely to continue considering the size of the Chinese and US markets. With the declining share price in recent times, it could be an opportune time to buy a2 Milk as a long-term investment.
In saying that, investors should still be wary about the difference between price and value when making investment decisions:
Although a2 Milk makes for a compelling investment case, the growth shares in the free report below could be even better considering there is growing competition in the a2 protein and infant formula spaces.
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Disclosure: At the time of writing, Jack does not own any shares in a2 Milk.
