Since the start of December the share price of a2 Milk Company Ltd (Australia) (ASX: A2M) has been dragged lower by a massive 16%.
I imagine this decline is down to investors feeling anxious following the shambolic events that unfolded over at rival Bellamy's Australia Ltd (ASX: BAL). Shareholders of Bellamy's have every right to feel aggrieved and it's no surprise to see Maurice Blackburn plans to launch a class action lawsuit.
But should a2 Milk shareholders fear the worst?
Following the company's strong trading update from late November, I feel confident that things are as positive as ever for a2 Milk in the China market.
As of the end of October the dairy company reported that it has grown sales by 96% to NZ$155.2 million. Earnings before interest, tax, depreciation, and amortisation has grown at the even more impressive rate of 473% to NZ$35.5 million.
This doesn't strike me as a company that is struggling as a result of a "temporary volume dislocation".
But that's not to say that things won't change in the future. As lucrative as the China market is, it certainly is a volatile place for foreign companies to conduct business.
I'm optimistic that a2 Milk's management team can navigate the changing regulations in China and continue the strong growth it has delivered on so far.
But pleasingly it's not just China that will provide it with growth. The domestic market and the US and UK markets will all play a key role in the company's future. A2 Milk isn't a one-trick pony, that's for sure.
Although buying on the dip is very tempting, it might be prudent for investors to wait and see what Bellamy's has to say when it finally emerges from hiding.
