A2 Milk Company Ltd shares tumble lower

The A2 Milk Company Ltd (ASX:A2M) share price tumbled notably lower on Thursday. Here's what you need to know…

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It doesn't happen that often, but the A2 Milk Company Ltd (ASX: A2M) share price was one of the worst performers on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) on Thursday.

The fast-growing dairy company's shares finished the day 4.5% lower at $7.01.

This means that a2 Milk's shares are now trading almost 13% off their 52-week high of $8.05.

Why have its shares plunged lower?

With no news out of the company or broker notes to speak of, today's decline appears to be a case of profit taking from investors.

Which shouldn't come as a huge surprise. After all, even after factoring in today's decline, a2 Milk's shares are up over 230% since this time last year.

A2 Milk wasn't the only growth share to tumble lower today. The shares of Blackmores Limited (ASX: BKL) BWX Ltd (ASX: BWX), and Bubs Australia Ltd (ASX: BUB) have also posted notably sharp declines.

Should you buy the dip?

I think this is a great opportunity for patient investors to snap up a2 Milk shares at a reasonably fair price.

While its shares are still expensive compared to the market-average, I think they are good value based on its current growth profile.

This is especially the case when you consider the huge opportunity the company has in the lucrative China market. Although sales in the nation have been growing at an incredible pace, the company still only has a tiny share of the infant formula market.

And with Chinese regulations likely to lead to a reduction in competition, I suspect that a2 Milk could win a greater share of the market over the next 12 months.

Overall, I expect this and its improving performance in the UK and United States will lead to above-average earnings growth for many years to come. This should more than justify the premium that its shares trade at today.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited and BWX Limited. 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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