It has been yet another positive day of trade for holders of Bellamy's Australia Ltd (ASX: BAL) shares.
In late morning trade the infant formula company's shares are up 10% to $15.76, having been up as much as 11.5% to $16.00 at one stage.
Why are they surging higher today?
With no news out of the company this morning, it appears investors have looked at the impressive A2 Milk Company Ltd (ASX: A2M) result as a sign of things to come when Bellamy's releases its results tomorrow.
This morning rival a2 Milk Company delivered total half-year revenue of NZ$434.7 million and half-year earnings before interest, tax, depreciation and amortisation (EBITDA) of NZ$143 million. This was an incredible 70% and 123% increase, respectively, on the prior corresponding period.
Once again, China was a key driver of this growth. Its China and Other Asia business recorded revenue growth of 204% to NZ$114.4 million and EBITDA growth of 252% to NZ$48.3 million.
This result was well ahead of the expectations of Goldman Sachs which I spoke about recently. Goldman had forecast sales of NZ$400.6 million and EBITDA of NZ$119.6 million.
Should you buy Bellamy's?
As I mentioned yesterday, the broker expects Bellamy's to deliver sales of $171 million and earnings before interest and tax of $34 million. This represents growth of 44% and 80%, respectively, on the prior corresponding period.
Whilst I think there's a strong chance that Bellamy's could outperform these expectations and even raise its full-year guidance again, I can't help but feel that its shares have now been priced for outperformance. Which could mean a significant sell-off if it fails to increase its guidance.
As a result, I think investors ought to resist the fear or missing out and wait for the Bellamy's release tomorrow before investing. If the result is merely in-line with prior expectations, investors may be presented with an opportunity to buy in at a more attractive price.
