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A promotion for Bellamy’s Australia Ltd and the a2 Milk Company Ltd (Australia)

Bellamy's baby formula
Credit: Bellamy's

The incredible gains achieved by shares of Bellamy’s Australia Ltd (ASX: BAL) over the last 15 months or so have officially been recognised today.

As of the close of trading on March 18 2016, Bellamy’s shares will officially be promoted into the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) index, reflecting its status as one of Australia’s 200 biggest listed companies.

Its addition together with that of companies such as Brickworks Limited (ASX: BKW) and St Barbara Limited (ASX: SBM), comes at the expense of other businesses such as AWE Limited (ASX: AWE) and Slater & Gordon Limited (ASX: SGH).

Notably, Bellamy’s rival, the a2 Milk Company Ltd (Australia) (ASX: A2M), has also been promoted into the S&P/ASX 300 (Index: ^AXKO) (ASX: XKO) cohort.

Bellamy’s is a Tasmania-based producer of organic formula and other food products for babies and toddlers. After listing at $1 a share in August 2014, the shares shot as high as $16.50 in December 2015, although they have retreated to around $11 today. Still, that’s a 1,000% return in less than 18 months!

Bellamy’s has enjoyed incredible success thus far, with supermarkets and pharmacies struggling to keep their shelves stocked with its formula products. Many of the formula tins sold in Australia are said to make their way over to China via ‘grey markets’ online, although the company is now also expanding its direct sales to Chinese residents to take advantage of the higher margins.

In its most recent earnings report, for the half-year ended 31 December 2015, it reported an 83.3% increase in revenue compared to the prior corresponding period. Meanwhile, earnings before interest and tax were up 334.4% while net profit rose 325.3%.

Of course, those kind of growth figures are not sustainable, although I do think it still has a long runway for growth in the years ahead. At $11 a share, Bellamy’s shares are not cheap, per se, but are still worth a closer look for long-term investors.

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Motley Fool contributor Ryan Newman owns shares of Bellamy's Australia. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia owns shares of Bellamy's Australia. 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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