The A2 Milk Company Ltd (ASX: A2M) share price has been one of the best performers during the coronavirus pandemic.
Despite the market crashing lower over the last couple of months, the infant formula and fresh milk company's shares have surged higher.
In fact, on Wednesday the a2 Milk Company share price hit an all-time high of $18.39.
Why is the a2 Milk Company share price at an all-time high?
Investors have been buying a2 Milk Company's shares during the pandemic on the belief that demand for its infant formula is strengthening despite the crisis.
This theory has been supported by the release of a third quarter update by smaller rival Bubs Australia Ltd (ASX: BUB).
On Tuesday the infant formula company posted record quarterly revenue of $19.7 million. This was an impressive 67% jump on the prior corresponding period and a sizeable 36% lift on the second quarter.
This strong growth was driven by stellar sales across all regions. Compared to the prior corresponding period, Australian sales were up 34%, sales to China jumped 104%, and sales in Other Markets grew 20x.
Is it too late to buy a2 Milk Company's shares?
As I mentioned here yesterday, I don't think it is too late to invest in a2 Milk Company's shares.
I estimate that its shares are currently changing hands at 30x FY 2021 earnings. Whilst this is a premium to the market average, I believe it is a fair price to pay for a company with such strong long term growth potential.
Especially given the increasing popularity of its products in the China market and its relatively modest market share in the country. At the end of the first half, its infant formula consumption value share increased to 6.6% in China. I feel this gives it a long runway for growth in the key market.
In addition to this, its sizeable cash balance of NZ$618.4 million gives it the option to accelerate its growth through earnings accretive acquisitions in the future.
Overall, I feel it is a great long term option for investors and could be a market beater throughout the 2020s.
