Although it has pulled back notably from its 52-week high, the Bubs Australia Ltd (ASX: BUB) share price remains one of the best performers on the All Ordinaries index in 2019.
Since the start of the year the infant formula and baby food company's shares have rocketed a massive 140% higher.
Why has the Bubs share price been on fire in 2019?
Investors have been scrambling to buy the company's shares this year thanks to a series of positive developments and its strong sales growth. These include a joint venture with China's Beingmate, a strategic channel partnership with Kidswant in China, and an alliance with Chemist Warehouse.
But perhaps the two most important developments have been the acquisition of a manufacturing facility and its expansion into cow milk infant formula.
The former is expected to expand its margins significantly, whereas the latter is being seen as a major positive as the cow milk formula market is materially bigger than the goat milk formula market. Bubs is targeting the premium side of the market and will offer an organic grass-fed range.
In addition to this, Bubs has caught the eye this year with its explosive sales growth. Thanks to strong demand for its infant formula products, in FY 2019 the company delivered a 154% increase in sales to $46.8 million.
Infant formula sales grew 278% on the prior corresponding period and now represent 43% of net revenue. This strong growth was driven largely by daigou shoppers which have been buying Bubs products, and those of rivals A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL), and then sending them over to China.
Supporting its growth was a 133% lift in adult milk powder sales to $15.6 million and a 59% jump in the sales of its organic baby food.
Should you invest?
I've been very impressed with the way Bubs has performed over the last 12 months and believe it is well-positioned to deliver further strong growth in FY 2020.
However, with its market capitalisation now at around $620 million, it is a reasonably high risk investment. In light of this, I would class it as long term buy, but I would restrict it to just a small part of a portfolio.
