Unfortunately it was a day to forget for the Bubs Australia Ltd (ASX: BUB) share price on Tuesday.
The infant formula and baby food company's shares finished the day down 10% to 61.5 cents.
What happened?
After the market closed yesterday Bubs released its full-year result which revealed a $5 million loss before tax on gross sales of $4.5 million.
Furthermore, it revealed that the company finished the year with a cash balance of $5.3 million. This may have the market concerned that a capital raising could be around the corner.
Which wouldn't be at all surprising given the extraordinary rise of its share price in recent months. Despite recent weakness in its shares, Bubs has still gained over 350% in just the last three months.
FY 2018 Outlook.
This morning the company revealed in its investor presentation that as of August 28 sales have increased 110% on the prior corresponding period to $1.25 million. While this growth is impressive, it is worth remembering that it is off a small base.
The market appears to have expected more judging by the lack of buyers of its shares on the market today.
Should you invest?
In fairness, I don't think you can judge Bubs on the first two months of FY 2018. The company has signed a significant number of supply agreements in recent months that I expect will start to positively impact its results as the year progresses.
While I think Bubs has set itself up as well as it can for success in the Chinese market, only time will tell whether it becomes the next a2 Milk Company Ltd (Australia) (ASX: A2M).
I would suggest investors keep their powder dry until there is a notable increase in sales that justifies the recent share price increase, especially with its cash balance looking somewhat stretched.
