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a2 Milk Company Ltd (Australia) shares just hit an all-time high

Although it finished the day slightly lower, the a2 Milk Company Ltd (Australia) (ASX: A2M) share price reached an all-time high of $7.55 in morning trade.

This stretched the year-to-date gain for the dairy company’s shares to a whopping 270%.

Why have its shares been on a tear?

Investors have been fighting to get hold of a2 Milk’s shares due to the insatiable demand for its infant formula in the China market.

This demand resulted in sales into China rising from $38.2 million to $88.9 million, and EBITDA from $9.2 million to $32.7 million in FY 2017.

Furthermore, investors appear to be pleased that the company has gained CFDA approval to continue selling its products in the market from January 1 2018 when regulations change.

As things stand, a2 Milk is the only listed Australian company that has been granted approval from Chinese regulators. This could put the company in a solid position to grow its market share in the lucrative market next year.

Should you invest?

Investors won’t have to wait long to find out if its recent gains have been justified. Next month a2 Milk will hold its annual general meeting and is widely expected to provide the market with a trading update.

Whilst I think that a2 Milk could be one of the best long-term buy and hold investments on the local market, I believe it would be prudent for investors to hold off an investment until after its annual general meeting.

Considering the incredible run of a2 Milk and its its infant formula peers Bellamy’s Australia Ltd (ASX: BAL), Wattle Health Australia Ltd (ASX: WHA), and Bubs Australia Ltd (ASX: BUB), should growth come in lower than expected, there’s a chance its shares could come tumbling down.

So for now, I would suggest investors take a look at these top growth shares that trade on reasonable valuations instead.

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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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