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.
