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The Wattle Health share price is down 60% in 2019 and at a two-year low

Share price plummet
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The Wattle Health Australia Ltd (ASX: WHA) share price continued its poor run and dropped to a two-year low of 38 cents on Thursday.

This latest decline means the infant formula and health and wellness company’s shares are down almost 60% since the start of the year.

Why has the Wattle Health share price crashed lower in 2019?

Investors have been heading to the exits in their droves this year after the company’s financial performance underwhelmed the market.

Last year investors were fighting to get hold of its shares on the belief that Wattle Health could be the next A2 Milk Company Ltd (ASX: A2M) or Bellamy’s Australia Ltd (ASX: BAL).

But at this stage this doesn’t look likely to be the case. In fact, rather than growing sales, in FY 2019 the company reported a very disappointing decline in sales.

For the 12 months to June 30, Wattle Health reported a 42% decline in sales revenue to just $0.89 million. And on the bottom line the company posted a loss of $10.3 million. This means for every $1 of product it is selling, it is losing approximately $11.60.

In addition to this, the company signed an US$85 million debt facility term sheet Gramercy Funds Management to fund the acquisition of Victoria-based manufacturing and packing facility Blend and Pack.

Investors may be concerned with the sizeable debt the company is taking on, especially given how it has yet to prove that there is sufficient demand for its products from consumers.

Should you buy the dip?

Whilst things could still come good for Wattle Health, given how competitive the market is, I’m not overly confident that the company will turn things around in the near term.

In light of this, I would stick with the bigger players in this hyper competitive market or consider a small investment in the fledgling Bubs Australia Ltd (ASX: BUB).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Bellamy's Australia and BUBS AUST FPO. 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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