MENU

Bellamy’s Australia Ltd (ASX:BAL) shares hit a 52-week low: Should you buy the dip?

It has been another disappointing day of trade for the Bellamy’s Australia Ltd (ASX: BAL) share price.

The infant formula company’s shares have continued their decline on Thursday and slipped almost 9% lower to a 52-week low of $7.28.

Are its shares in the bargain bin?

I think that its shares are in the bargain bin right now after this week’s sizeable decline. However, I’m not overly convinced that the selling has ended, so I wouldn’t necessarily rush in to buy shares just yet.

In fact, until the company receives its approval to sell Chinese label products, I suspect its shares will remain under pressure. Especially given the underwhelming guidance it provided for Australian label sales in FY 2019 on Wednesday.

Australian label sales are expected to be down as much as 15% in the first half as it transitions to its new infant formula product, before ending the year flat.

While this is obviously very disappointing, I think investors need to focus less on the short term and more on its medium term prospects.

Despite FY 2019 looking like a bit of a write-off, management still believes it can hit its $500 million sales target in FY 2021. This compares to sales of $329 million in FY 2018 and implies explosive sales growth in FY 2020 and FY 2021.

If it can deliver on this then its shares will not be down at this level for long. This could make it a great buy and hold option along with A2 Milk Company Ltd (ASX: A2M) once the dust settles.

I’m not alone in thinking this way. A note out of Goldman Sachs this morning confirmed that it still rates Bellamy’s a buy, albeit with a reduced price target of $13.20.

In FY 2020 Goldman expects sales and profit growth to accelerate again, leading to sales of $393.6 million and earnings per share of 52 cents. This means that its shares are now priced at a lowly 14x estimated FY 2020 earnings.

As well as Bellamy's, here is another top growth share that could be trading at a bargain price today.

Motley Fool Australia Issues Rare "Double Down" Buy Alert

Scott Phillips has stumbled upon a little-owned stock he believes could be one of the greatest discoveries of his 25 years as a professional investor.

This is your chance to get in early on of what could prove to be a very special investment recommendation. Think about how many investing trends you've missed out on, even though you knew they were going to be big. Don't let that happen again. This is your chance to get in early.

Simply click here to get started and access our secure sign-up page.

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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!