The A2 Milk Company Ltd (ASX: A2M) share price has continued its positive run and pushed higher on Wednesday.
The infant formula and fresh milk company's shares are up 2% to $18.67 in afternoon trade.
This latest gain means that its shares are now up 33% since the start of the year.
Why is the a2 Milk Company share price pushing higher today?
Investors have been buying a2 Milk Company's shares on Wednesday after it revealed that demand for its products has been strong in the second half of FY 2020. This is particularly the case for its infant nutrition products in the China and Australia markets.
In light of this, the company upgraded its guidance for FY 2020 this morning.
It now expects full year revenue in the range of NZ$1,700 million to NZ$1,750 million and an EBITDA margin in the range of 31% to 32%. This compares to its guidance for "strong revenue growth" in the second half and a full year EBITDA margin in the range of 29% to 30%.
Based on the top end of its guidance range, a2 Milk Company will deliver revenue of NZ$1,750 million and EBITDA of NZ$560 million in FY 2020. This will be a 34.1% and 35.4% increase, respectively, on the previous year.
Is it too late to buy a2 Milk Company's shares?
I don't believe it is too late to buy a2 Milk Company's shares if you're planning to hold onto them for the long term.
If the company's net profit grows at the same rate as its EBITDA, I estimate that a2 Milk Company will deliver earnings per share of approximately 53.2 NZ cents or 50.3 Australian cents.
This means that its shares are currently changing hands for 35x estimated full year earnings.
While this is clearly a premium to the market average, I feel that it is more than deserved given its growth profile. After growing its EBITDA by 46.1% in FY 2019, it is now on course to deliver a 35.4% increase in FY 2020.
Furthermore, given its relatively modest market share in the lucrative China market and its strong brand and differentiated product, I believe it still has a significant runway for growth over the next decade.
For this reason, it remains my preference in the industry ahead of the likes of Bubs Australia Ltd (ASX: BUB) and Clover Corporation Limited (ASX: CLV).
