Are A2 Milk Company Ltd (ASX:A2M) shares in the buy zone?

Despite a sizeable decline from its 52-week high, the A2 Milk Company Ltd (ASX: A2M) share price has still been one of the best performers during the last 12 months.

During this time the dairy and infant formula company’s shares have risen a remarkable 160%.

Are A2 Milk Company shares still in the buy zone?

I think they are and believe investors could be rewarded handsomely by being patient and holding onto them for the long-term.

I’m not alone in thinking this way. A note out of the Macquarie Group Ltd (ASX: MQG) equities desk today reveals that its analysts are bullish on the company’s prospects.

According to the note, the broker has retained its outperform rating and $12.40 price target on a2 Milk Company’s shares. This price target implies potential upside of almost 25% from the current share price.

While this note relates to the positives around the company launching a co-branded fresh milk product in New Zealand with Fonterra (ASX: FSF) and the belief that it could accelerate a2 Milk Company’s global expansion, the broker has previous talked up its long-term potential.

This is due to its belief that the company is creating value by building a business in a category that is both disruptive and growing.

Are its shares good value?

Macquarie estimates that a2 Milk Company will achieve earnings per share of 23.9 cents in FY 2018 and then 34.2 cents in FY 2019.

Based on this estimate its shares are changing hands at approximately 29x FY 2019 earnings, which I think is good value for a company expected to grow earnings by 43% next year.

However, as we have seen this year, if its earnings growth comes in lower than expected there is a danger that its shares could take a tumble.

But overall, I feel the risk/reward on offer here is sufficient. Though, I would still choose industry peer Bellamy’s Australia Ltd (ASX: BAL) ahead of it on valuation grounds.

As well as a2 Milk and Bellamy's, I would be buying these top mid cap shares this month.

The Disruptors: 3 Revolutionary Aussie Companies to Back for 2018

We’re living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.

That’s why at The Motley Fool we’ve been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Atlassian.

We’ve found three exciting companies that we believe re poised to perform in the new year. Click here to uncover these ideas!

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.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now