The Motley Fool

Should you buy Bubs Australia Ltd shares?

It certainly has been a wild ride for the Bubs Australia Ltd (ASX: BUB) share price in 2017.

After hitting the ASX boards at a listing price of 10 cents in January, the goat’s milk infant formula and baby food company’s shares reached as high as 96 cents in August.

At the time of writing they sit close to the middle of this trading range at 49 cents.

Should you invest in Bubs?

When it comes to high risk shares, Bubs would have to be up there with the best of them.

But it could potentially provide a high reward that makes it worth taking the risk.

After all, investors only need to look at a2 Milk Company Ltd (Australia) (ASX: A2M) to see how lucrative the Chinese infant formula market is.

Like a2 Milk, Bubs has its eyes firmly on the market and has worked extremely hard to build up its profile in China.

Agreements with Brilite Nutritionals and NetEase will put the brand in front of millions of Chinese consumers through mother and baby retail stores and online.

If this exposure can be converted into sales then I believe Bubs could have a very bright future ahead of it.

But with sales data very limited at this stage, it is difficult to gauge whether the company will live up to the market’s lofty expectations.

For this reason, I’m holding fire, keeping Bubs on my watchlist, and will make a decision on whether to invest upon the release of its next sales update. I estimate that this will be in two weeks’ time.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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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