Is it time to buy Bubs Australia Ltd shares?

The Bubs Australia Ltd (ASX:BUB) share price has fallen 35% since early November. Is it time to invest?

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In November the Bubs Australia Ltd (ASX: BUB) share price reached a record high of $1.10.

Since then its shares have tumbled over 35% and are now changing hands at 71 cents.

Is it time to buy Bubs' shares?

Almost. I think fair value for its shares at the moment is about 70 cents, so would suggest investors hold out a little longer in the hope that they drop to 65 cents in the new year.

At that level I think the baby food and goats milk infant formula company's shares provide investors with a compelling risk/reward.

Though, it is worth pointing out that it is still a high risk investment.

I have been very impressed with what Bubs has achieved in 2017. This includes agreements with Sigma Healthcare Ltd (ASX: SIG), Costco, Netease Kaola.com, and Chinese mother and baby stores through Brilite Nutritionals.

But unlike A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL), this hasn't led to a notable increase in sales as of yet.

I expect sales will grow strongly in 2018 as a result of these agreements, but if it fails to do so there is a danger that its shares could sink significantly lower.

What else is out there?

Finally, another small-cap infant formula company that will be worth watching in 2018 is Wattle Health Australia Ltd (ASX: WHA).

Like Bubs, it has signed a number of supply agreements that have the potential to take the company to the next level. Just as long as the products resonate with consumers.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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