A2 Milk Co Ltd (ASX: A2M) shares are up 1.18% during the lunch hour on Monday.
The S&P/ASX 200 Index (ASX: XJO) dairy stock closed Friday trading for $5.91 per share. Shares are currently trading for $5.98 apiece.
With A2 Milk shares down 7% over the past month, is now a good time to buy?
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What does the broker forecast?
At just under $6 per share, Bell Potter analyst Jonathan Snape sees a significant upside for the company.
Bell Potter has a buy rating on A2 Milk shares with a $7.65 price target.
That represents a 27% upside from the current price.
Snape estimates earnings per share (EPS) growth of 19.5% for 2023 and 15.3% for 2024.
Strong company results
A2 Milk reported some strong half-year results on 20 February, though the company's share price fell on the day.
Highlights included an 18.6% year-on-year increase in revenue, driven by strong growth in the company's Chinese infant formula sales. Revenue reached NZ$783 million for the six months.
The big revenue boost helped deliver a 22.1% increase in net profit after tax (NPAT), which came in at NZ$69 million.
And the company ended the half year with a strong balance sheet, reporting a cash balance of NZ$707 million.
Guidance was also positive, with management forecasting low double-digit revenue growth along with steady margins.
Commenting on the company's growth in the Chinese markets, A2 Milk CEO David Bortolussi said:
As the China market continues to evolve, we are focused on refining our English label distribution model which resulted in a modest increase in sales with market share increases in the CBEC and Daigou channels.
All told, with A2 Milk shares trading at $5.98 apiece, today might represent a profitable entry point.
How have A2 Milk shares been tracking?
As you can see in the chart below, A2 Milk has strongly outperformed the benchmark over the past 12 months. The ASX 200 dairy stock has gained 12% while the ASX 200 fell 6% over that time.
