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Can A2 Milk Company Ltd shares beat the market again this year?

In 2017 the A2 Milk Company Ltd (ASX: A2M) share price was the best performer on the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) with a massive 261% gain.

Pleasingly for shareholders, the dairy company’s shares have managed to build on this gain in morning trade and have had a solid start to the new year.

In late morning trade the dairy company’s shares are up almost 2.5% to $7.55.

Can a2 Milk beat the market in 2018?

While I doubt a2 Milk will be able to match its 2017 share price performance this year, I still think it has the potential to be a market-beater.

Thanks to regulation changes in China, I feel a2 Milk is well-positioned to continue growing its share of the Chinese infant formula market.

At the last count a2 Milk held just a paltry 3.5% value share in China despite its rampant growth in the lucrative market. Considering the growing popularity of its products in the country, the growing middle-class, its unique a2 protein ingredient, and changes to regulations, I wouldn’t be surprised to see this market share double over the next few years.

This could lead to above-average profit growth that more than justifies the premium its shares trade at today.

I’m not the only one that is bullish on the fast-growing dairy company. A note out of Citi last month revealed that the broker has retained its buy rating and $8.85 price target on a2 Milk’s shares.

This price target implies potential upside of over 17% for its shares over the next 12 months.

In my opinion this could make it worth snapping up shares today ahead of industry rivals Bellamy’s Australia Ltd (ASX: BAL) and Bubs Australia Ltd (ASX: BUB).

As well as a2 Milk (and Bellamy's), I think that these growth shares would be great options for investors in 2018.

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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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