Should you buy A2 Milk Company Ltd shares this week?

Is now a good time to pick up A2 Milk Company Ltd (ASX:A2M) shares or have they topped out?

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On Tuesday the A2 Milk Company Ltd (ASX: A2M) share price had a rare down day and finished the session with a decline of almost 3.5% to $11.79.

Despite this decline the fast-growing dairy company’s shares are still up a remarkable 263% since this time last year.

Is it too late to invest in a2 Milk Company?

I don’t for a second believe that it is too late to pick up shares in a2 Milk Company.

Although I wouldn’t expect anywhere near as strong returns over the next 12 months as its shares generated in the last 12 months, I still think they have the potential to be market-beaters.

Especially given the increasing demand for its infant formula products in the massive China market.

I believe this demand can continue to grow for a long time to come, allowing a2 Milk Company to generate above-average earnings growth for the foreseeable future.

After all, despite its amazing progress in China, it still only has a 5.4% share of the market. With new regulations easing competition, I expect a2 Milk Company to grow its share meaningfully over the next few years.

I’m not alone in thinking that a2 Milk Company is a buy. According to a research note out of Morgans at the end of March, it has an add rating and $14.40 price target on its shares.

Analysts at Citi are almost as positive and have a buy rating and $14.00 price target on its shares at present.

The mid-range of these two price targets equates to potential upside of over 20% for its shares over the next 12 months. And while its shares do trade at a significant premium to the market average, I believe the growth the company is capable of achieving more than justifies this.

In my opinion, this means an investment in a2 Milk Company offers investors a compelling risk/reward.

Perhaps, the hardest decision that investors may have to face is deciding whether to choose it or the equally attractive Bellamy’s Australia Ltd (ASX: BAL).

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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 Scott Phillips.

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