The A2 Milk Company Ltd (ASX: A2M) share price was a positive performer again in April.
During the month the infant formula and fresh milk company's shares outperformed the market with a gain of almost 10%.
Why did the a2 Milk Company share price race higher?
Investors were fighting to get hold of the company's shares last month after it released another very positive trading update.
According to the release, a2 Milk Company has continued to deliver strong revenue growth across all key regions since the release of its half year results at the end of February.
One area of the business that was performing particularly strongly was its infant nutrition products. Especially those that are sold in the key markets of China and Australia.
In light of this, at the end of the third quarter the company's sales were tracking ahead of expectations. This outperformance has been driven primarily by the coronavirus pandemic-induced pantry stocking.
Though, management warned that it is unknown when and to what extent this pantry stocking may unwind.
Guidance upgrade.
As a result of its stronger than expected third quarter, the company has upgraded its guidance for FY 2020.
While acknowledging that the outlook for both revenue and earnings remain uncertain because of COVID-19, it expects revenue to be in the range of NZ$1,700 million to NZ$1,750 million in FY 2020.
In addition to this, its EBITDA margin expectations have improved and it is guiding to a margin of 31% to 32%.
This compares favourably to its previous 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, this will mean revenue of NZ$1,750 million and EBITDA of NZ$560 million. This represents an impressive 34.1% and 35.4% increase, respectively, on the prior corresponding period.
Is it too late to invest?
I don't believe it is too late to invest in a2 Milk Company's shares. Especially given its outstanding long term growth potential.
And although its shares aren't cheap at 31x forecast FY 2021 earnings, I believe its growth profile justifies this premium.
