A2M share price in focus
Founded in New Zealand in 2000, The a2 Milk Company is involved with the sale of products sold under the a2 brand which contain the naturally occurring A2 protein type.
The company is not responsible for producing any of its products itself. It has access to over 25 certified dairy farms across Australia where its suppliers handle the production process. Additionally, its instant formula products are produced by its supply partner Synlait Milk in New Zealand.
There are various claimed health benefits of a2 Milk, the main one being that it’s easier to digest than ‘normal’ milk, so some people that normally have trouble with milk can stomach it a bit better.
A2 Milk Company Ltd is a growth stock, and so it requires a different set of rules and may not be simple to value at times. Studies have shown that over 5-10+ years, it’s top-line revenue growth which explains a stock’s performance. That’s why it’s good to see A2 Milk Company Ltd is able to grow revenue at 11.6%, a good clip.
DOW shares
Downer is the leading provider of integrated infrastructure services in Australia and New Zealand. They’re responsible for building, maintaining, and operating transit systems, utilities services, and public infrastructure.
While the name might not be familiar, you’ve definitely come across their work. Downer operate services like the Yarra Trams in Melbourne, and build the passenger trains you see in most states.
Downer separates its business into three main segments of Transport, Utilities, and Facilities. Transport delivers a little over 50% of their revenue, and Utilities and Facilities around 20% and 30% respectively.
A2M share price valuation
As a growth company, some of the trends we would be looking for from A2M include revenue growth, profit growth, and return on equity (ROE). Since 2021, A2M has grown revenue at a rate of 11.6% per year to reach $1,673m in FY24. Over the same time period, net profit has increased from $81m to $168m. A2M last reported a ROE of 12.8%.
Since DOW is more of a ‘mature’ or ‘blue-chip’ business, some of the metrics that might be important to us include the debt/equity ratio, average yield, and return on equity, or ROE. In FY24, Downer EDI Ltd reported a debt/equity ratio of 81.1%, meaning the company has more equity than debt.
As for dividends, since 2019 DOW has achieved an average dividend yield of 3.7% per year.
Finally, in FY24, DOW reported an ROE of 3.6%. For a mature business you generally want to see an ROE of more than 10%, so DOW’s returns are a bit less than what we’d expect.
It’s important to keep in mind that these are only a selection of metrics and don’t give us enough information to value the business or make an investment decision. To learn more about valuation, I’d recommend checking out one of our free online investing courses.
