The A2 Milk Company Ltd (ASX: A2M) share price is up 14% so far this year as the company announced an expansion to its senior management team and rode a momentum wave in early January.
A2 was one of the top gainers in yesterday's trade, closing 3.68% higher at $11.84 per share. The share price has ridden stronger broad market sentiment and expectations of expanded operations as it added a Chief Commercial Officer and Chief Technical Officer.
The company has been a standout performer on the ASX over the last few years, having increased 466% in the last 2 years and a lowly 57% in the last 12 months. I believe the business remains in a strong position given ongoing demand for baby formula in China and the competitive dominance that A2 enjoys in its chosen segments.
It has been a different story for rival Bellamy's Australia Ltd (ASX: BAL) this year which has seen its share price fall 1.05% to $7.51 per share at yesterday's close. However, a forward P/E ratio of 17.8 is more attractive than the lofty 35.2 of A2 Milk and could demonstrate an attractive relative value play in 2019 for those keen on the baby formula market.
With a market cap of $851.4 million, Bellamy's is just a fraction of A2's size and is awaiting Chinese regulatory approval to sell its products into China. That would be a game-changer for Bellamy's and could see its share price explode on the potential sales growth it could realise throughout 2019.
Foolish Takeaway
I believe the technical environment for both dairy companies remains supportive looking ahead in 2019. Chinese demand for baby formula shows no signs of slowing down while both A2 and Bellamy's appear operationally strong. On a relative value basis, I'd be leaning towards Bellamy's for those looking for high capital growth, whilst A2 is arguably a safer bet as a value stock throughout 2019.
