Why Wattle Health Australia Ltd shares are up 160% in three months

The Wattle Health Australia Ltd (ASX: WHA) share price continued its incredible run on Friday.

At one stage the fledgling infant formula company’s shares were a massive 15% higher at an all-time high of $1.68.

As we approach the market close Wattle Health’s shares have given back some of these gains, but still sit over 10% higher at $1.61.

This means that its shares have now risen a whopping 160% in just three months.

Why have its shares gone gangbusters?

Just like a2 Milk Company Ltd (Australia) (ASX: A2M), Bellamy’s Australia Ltd (ASX: BAL), and Bubs Australia Ltd (ASX: BUB), investors have been fighting to get hold of Wattle Health’s shares due to the insatiable demand for infant formula from Chinese consumers.

Investors appear to be increasingly bullish on Wattle Health in particular due to the fact that it is expected to be awarded the much sought after CFDA approval in November.

This will allow the company to sell infant formula products in China from January 1 when regulations change. Of the group, at present only a2 Milk has been granted CFDA approval.

Should you invest?

While I think that Wattle Health is in a good position to take on a2 Milk in China thanks to its supply agreements, just because it should have CFDA approval by the end of the year doesn’t guarantee that its products will then be bought by consumers.

So with its market cap nearing $190 million, I feel it is a little too risky to start an investment at this stage.

All being well Wattle Health will be another infant formula success story, but I’m going to need to see sales growth that backs up this valuation before I part with any hard earned money.

So in the meantime, I would suggest investors take a look at these stellar growth shares.

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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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