The demise of Bellamy's Australia Ltd (ASX: BAL) is well known, particularly if you were a shareholder. The spectacular collapse in its share price would make you think that there's now no future in baby formula.
I'm not sure investors need to worry that seriously about other baby formula producers, their prospects haven't necessarily been dented, perhaps they are actually better with a weaker Bellamy's.
In fact, I think the below three stocks could be three of the better performers on the ASX over the next few years:
Bega Cheese Ltd (ASX: BGA)
The dairy giant has a market capitalisation of $808 million, with its shares down 20% since 24 October 2016. I think now is a good time to pick up its shares as infant formula isn't all of its sales, unlike Bellamy's.
In FY16 it grew revenue by 7.5% and earnings per share by 33%. This was a strong result and I think FY17 could be a solid year too.
Bega just announced it will be acquiring most of Mondelēz International's Australia business, which includes Vegemite. I'm sure Bega will milk the Vegemite brand as Australian owned, plus there would be a lot of Vegemite and Bega cheese products and potential cross promotions it could release. Overall, it's a great deal.
Bega is trading at 28x FY17's estimated earnings with a grossed up dividend yield of 2.56%.
Blackmores Limited (ASX: BKL)
Blackmores is the health product specialist with a market capitalisation of $2 billion. Its shares have fallen an incredible 46% since December 2015 due to its sales not growing quite as fast as investors would like.
I think the current price represents a good opportunity to buy, as Blackmores is rolling out new products and entering new countries.
The sales blip is likely to be temporary and Blackmores can keep growing sales in FY18 and beyond. The infant formula is only a very small part of its business for now, but it could capitalise on Bellamy's loss over the coming months.
Blackmores is trading at 23.7x FY17's estimated earnings with a grossed up dividend yield of 4.96%.
a2 Milk Company Ltd (ASX: A2M)
The dairy company has grown its share price by 276% since April 2015 and there's no sign of it slowing down thanks to its impressive results.
In FY16 it grew infant formula revenue by 414% and total revenue by 127%. With China only just getting rid of their one child policy, there could be a bumper few years for a2.
It's currently trading at 25.4x FY17's estimated earnings and there is a strong chance it may start paying dividends soon, which would be very welcome to most shareholders.
Foolish takeaway
All three of these businesses will have pleasing growth over the next few years. Out of the three I'd pick a2 because it has rapidly increased its market share and I think there's more to come.
