Is it too late to buy Bellamy’s Australia Ltd shares?

Although the Bellamy’s Australia Ltd (ASX: BAL) share price finished the day lower on Monday, at one stage it reached an all-time high of $18.75.

This brought its 12-month return to a staggering 352%.

Is it too late to buy Bellamy’s shares?

I think it could be. Whilst I’m a big fan of the company and have been very impressed with the way it has turned around its fortunes over the last 12 months, I think its shares are now fully valued.

As I mentioned last month, I wasn’t the only one that was impressed with its performance of late.

Two weeks ago Goldman Sachs slapped a buy rating and price target of $18.00 on Bellamy’s shares following the release of its full-year results. The broker made the move on the belief that the company’s gross margin expansion opportunities were underappreciated by the market.

Judging by the share price performance since that research note was released, the market now fully appreciates this opportunity.

So much so, Bellamy’s shares are now changing hands at approximately 45x Goldman’s earnings estimate for FY 2018 or 30x its FY 2019 estimate.

In light of this, I see limited upside for Bellamy’s shares over the next 12 months, which could make it worth locking in gains now if you’re a shareholder. If you’re not a shareholder, I would suggest you hold off and wait for a better entry points.

The same arguably applies for A2 Milk Company Ltd (ASX: A2M) shares as well. By my calculations they are changing hands at about 35x estimated FY 2019 earnings.

Foolish takeaway

Both Bellamy’s and a2 Milk Company are up there amongst my favourite growth shares on the local share market. But based on today’s prices and analysts’ earnings estimates, I think they are fully valued.

If both companies outperform expectations, as they often have, then they could yet justify a move even higher. But until then I intend to wait for a better entry point and focus on other opportunities.

In the meantime, these explosive growth shares trade on much more attractive prices right now.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

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 Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.