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Bellamy’s Australia Ltd (ASX:BAL) share price surges 11% higher: Too late to invest?

It has been a great start to the week for the Bellamy’s Australia Ltd (ASX: BAL) share price.

In afternoon trade the organic infant formula company’s shares are up 11% to $8.14.

Why are Bellamy’s shares surging higher today?

News that trade tensions between the United States and China are easing following a meeting at the G-20 has gone down well with the market today.

Trade war concerns had put a dampener on areas of the market exporting products to China in recent months. As a result, the revelation that President Trump won’t be increasing tariffs as planned appears to have led to a relief rally for exporters such as Bellamy’s, A2 Milk Company Ltd (ASX: A2M), and Blackmores Limited (ASX: BKL) today.

Is it too late to buy Bellamy’s shares?

I don’t believe for a second that it is. Although its shares have rallied strongly today, they are still down a massive 65% since peaking at $23.07 in March of this year.

This selloff has been caused partly by trade war concerns, but predominantly by the unexpected delay in gaining its SAMR accreditation. This accreditation is necessary for it to sell Chinese-labelled products in the massive China market.

Due to its inability to sell directly in China and the disruption caused by the introduction of a new formulation of its infant formula product, sales growth is expected to be extremely limited this year.

However, management is confident that this is just a short term blip and expects sales to grow to $500 million by FY 2021. This compares to sales of $328.7 million in FY 2018.

In light of this, with its shares trading at a reasonable 22x earnings, I think Bellamy’s is one of the best growth options available to investors that are willing to make a long term investment.

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. 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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