Over the last 12 months the Bellamy's Australia Ltd (ASX: BAL) share price has been one of the best performers on the Australian share market.
During this time the organic infant formula producer's shares have rallied an incredible 342%.
Is it too late to snap up shares?
As far as one leading broker is concerned it isn't. A note out of Goldman Sachs last week reveals that its analysts have retained their buy rating on Bellamy's shares but increased their price target significantly.
According to the note, the broker has lifted its price target by 43% to $25.70. This is approximately 24.5% higher than the last close price.
Goldman has made the move after making positive revisions to Bellamy's earnings forecasts, increasing its view of a fair earnings multiple for its shares to trade on due to its high growth expectations, and lifting its merger and acquisition multiple.
The broker now expects Bellamy's to achieve earnings per share of 71.1 cents in FY 2019 and 101.6 cents in FY 2020. Its forecast for FY 2018 of 40.4 cents remains the same.
Its analysts have lifted their forecast due to their belief that Bellamy's will increase its prices during the first-half of FY 2019 in conjunction with the introduction of a re-formulated infant formula product.
Goldman believes that a price increase of 10% to 15% would be achievable. This would bridge the current pricing gap between itself and organic infant formula peers such as A2 Milk Company Ltd (ASX: A2M) in China, which stands at between 18% and 63% currently on the JD.com platform.
Should you invest?
I think that Goldman Sachs makes some great points in this note and believe that a price increase of the amount proposed would be easily absorbed in the China market.
Based on Goldman's FY 2019 forecast, the company's shares are changing hands at 27x forward earnings. While this isn't necessarily cheap, given its current growth profile I think this is a reasonably fair price to pay and would class it as a buy today as well.
It is, however, worth noting that Bellamy's has not yet received its CFDA approval. While I expect it will receive it in the near future, it would be a catastrophe if it were denied it and would almost certainly cause its share price to collapse. So it is worth bearing that possibility in mind before buying shares.
