The Bellamy's Australia Ltd (ASX: BAL) share price has continued its ascent and is higher by 3.5% to $12.35 in late afternoon trade.
This latest gain means that the organic infant formula company's shares have now climbed 96% in just three months.
Why have its shares been on a tear?
Investors have been fighting to get hold of shares such as Bellamy's, a2 Milk Company Ltd (Australia) (ASX: A2M), and even Wattle Health Australia Ltd (ASX: WHA) thanks to strong demand for Australian infant formula from Chinese consumers and daigou shoppers.
This led Bellamy's to recently upgrade its full-year guidance and for analysts at Citi to upgrade its shares to a buy rating.
Furthermore, the broker increased the price target on Bellamy's shares to $14.40.
Which means that even after almost doubling in value over the last three months, there is the potential for a further 16.5% gain for its shares according to Citi.
Should you invest?
While I have been impressed by the turnaround at Bellamy's, I still believe that its shares are a hold at the current share price.
This is because at 39x estimated forward earnings I just don't believe the risk/reward on offer is great enough to justify starting an investment.
However, should it receive its CFDA approval sooner than expected, there is the potential for greater than forecast earnings growth in FY 2018 which could justify the current share price.
But until that approval is granted, I'll be sitting this one out unless its shares were to come down to a more appropriate level.
