The market may have dropped lower today, but the same cannot be said for the Bellamy's Australia Ltd (ASX: BAL) share price which has had a positive start to 2019.
In afternoon trade the infant formula company's shares are up 5% to $7.67.
Why is the Bellamy's share price pushing higher?
With no news out of Bellamy's, I suspect that today's gain could be down to investors feeling that its shares have been oversold. After all, despite today's solid gain, the Bellamy's share price has lost almost half of its value over the last six months.
This means that its shares are currently changing hands at a little under 19x trailing earnings.
Should you buy shares?
While minimal growth is expected in FY 2019 due to delays with its application for the SAMR accreditation which allows it to sell Chinese labelled products in the massive China market, I believe its long-term growth potential makes it worth considering.
This view is echoed by analysts at Goldman Sachs that have a buy rating and $13.20 price target on the company's shares. This price target implies potential upside of over 72% for its shares over the next 12 months.
While this price target might be ambitious, I do agree with the broker that it has the potential to be a market beater.
According to the note, Goldman Sachs expects sales and earnings to fall back a touch this year, before rising strongly in FY 2020 and FY 2021.
It has forecast sales of $309.5 million this year, down 5.8% on FY 2018's result, and then sales growth of 27% to $393.6 million in FY 2020 and 19.6% to $470.9 million in FY 2021.
It is a similar story for earnings per share. Goldman expects earnings per share to fall to 38 cents in FY 2019, before rising to 52 cents in FY 2020 and 66 cents in FY 2021.
Based on these forecasts, Bellamy's shares are changing hands at under 15x estimated FY 2020 earnings.
I think this makes its shares great value if the company delivers on its medium term growth target of $500 million in sales by FY 2021, which is slightly ahead of Goldman's forecasts.
The key to this growth will be gaining SAMR accreditation. Pleasingly, management appears confident that it is coming.
In October it said: "SAMR registration of our Chinese-label formulation is progressing and we remain confident in our technical application; but have no further update on the timing of approval."
Overall, I think Bellamy's would be a great option for investors along with A2 Milk Company Ltd (ASX: A2M) and well ahead of smaller rival Bubs Australia Ltd (ASX: BUB).
