Last week certainly was an eventful week for the Bubs Australia Ltd (ASX: BUB) share price.
At one stage the shares of the infant formula and baby food company looked set to break through the $1.00 mark for the first time when they reached an all-time high of 96 cents.
But the next day its shares tumbled all the way down to as low as 61 cents. From top to bottom that's a staggering decline of over 36% and came after takeover speculation was dismissed by the company.
At present its shares are trading at 70 cents again. Which means that despite this sudden fall from grace, its shares are still up well over 400% in just the last three months.
Where next for the Bubs share price?
That certainly is the million dollar question.
With approximately 238 million shares outstanding, Bubs has a market cap of $166 million at the current share price.
Fourth-quarter revenue came in a $1.4 million, meaning annualised revenue is approximately $5.6 million at present.
This means its shares are changing hands at close to 30x annualised sales, compared to a2 Milk Company Ltd (Australia) (ASX: A2M) which trades at 7.4x sales.
While this immediately strikes me as overvalued, it is worth remembering that the company has yet to see the real benefits of its numerous supply agreements in the Chinese market.
If the company's deals do result in a significant lift in sales in FY 2018 as many in the market expect, then it could start to trade on a more reasonable sales multiple in the near future.
This could support the current share price or even take it higher. But it is of course a reasonably big "if" and makes an investment in Bubs a high risk one.
I would suggest that investors keep the company on their watchlist for the time being and look out for next quarter's sales result.
