Why Bellamy’s Australia Ltd surged another 10.6% today

Bellamy’s Australia Ltd (ASX:BAL) has risen a remarkable 24% since Thursday.

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Bellamy’s Australia Ltd (ASX: BAL) has continued its remarkable run today with the stock surging another 10.1% to $4.24, giving it a massive 24% gain since close of trade on Thursday.

With the end of financial year looming, a number of ASX-listed companies have issued profit warnings in recent times, confessing to the market that their previous estimates may have been a little too optimistic.

Bellamy’s bucked that trend in style on Friday when it said that it now expects full-year Net Profit After Tax (NPAT) to be between $7.6 million and $8.3 million. That compares to the guidance it provided in February where it said second-half sales would be consistent with first-half NPAT of $3.2 million, implying a full-year profit of approximately $6.4 million.

Although the stock trades on a rather high forward-looking price/earnings ratio of roughly 55x 2015 financial year earnings, investors are clearly seeing enormous potential for the baby formula and food products company, which only listed on the ASX late last year. Indeed, while its products are growing in popularity in Australia, demand for Australian-made baby formula is also exploding in China, which bodes well for the future of Bellamy’s.

While the stock could experience a dip in the near future (could, being the key-word), Bellamy’s still looks like an appealing investment prospect which could generate fantastic returns for long-term shareholders.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest. The Motley Fool owns shares of Bellamy's Australia Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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