Since peaking at $1.10 earlier this month the Bubs Australia Ltd (ASX: BUB) share price has now tumbled over 31% to 75.5 cents.
Despite this significant decline the goats milk infant formula and baby food company's shares are still up a massive 655% since hitting the ASX boards at 10 cents per share earlier this year.
Are they in the buy zone?
While I have been very impressed with the progress that Bubs has made since listing on the local share market, I'm not a buyer on valuation grounds and plan to wait for a further pull-back before making a purchase.
I'm not alone in thinking this way it seems. This morning a broker note out of Morgans revealed that its analysts have initiated coverage on the company with a hold rating.
Furthermore, the broker has placed a 70 cents price target on Bubs' shares, approximately 7% lower than the current share price.
According to the note, analysts at Morgans like the company's product, executive team, and believe it has strong growth potential. However, they believe its shares are fully valued now following their impressive rally this year.
What now?
I would suggest investors wait for a better entry point somewhere around the 60 cents mark. Until then, I would only buy shares if the company produces sales data that shows that its sales are growing in a manner that justifies its current valuation.
In the meantime, investors might want to consider industry peers a2 Milk Company Ltd (Australia) (ASX: A2M) and Blackmores Limited (ASX: BKL).
