Is the A2 Milk (ASX:A2M) share price dirt cheap?

Is it time to buy A2 Milk shares?

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The A2 Milk Company Ltd (ASX: A2M) share price was out of form again on Monday.

The embattled infant formula company’s shares dropped 2.5% to $6.23.

This means A2 Milk’s shares are now down almost 16% over the last three weeks.

Is the A2 Milk share price good value now?

Positively for its long-suffering shareholders, one leading broker continues to see value in the A2 Milk share price at the current level.

According to a note out of Bell Potter this morning, its analysts have retained their buy rating and $7.70 price target on its shares.

Based on the current A2 Milk share price, this implies potential upside of ~24% for investors.

What did the broker say?

Bell Potter has been looking at recent industry data to get a picture of how A2 Milk is performing.

While the broker acknowledges that China’s infant formula import volumes continue to demonstrate double digit year on year declines, it highlights that volumes are improving. For example, September volumes were down 24% year on year but up 10% month on month.

Outside this, Bell Potter continues to believe that the A2 Milk share price is not reflective of its turnaround potential. Particularly given its belief that the company could double its earnings by FY 2026.

It explained: “There is no change to our Buy rating. We see the scope for EPS to double by FY26e, if A2M can execute on the China offline expansion strategy, while recovering 50% of the lost sales (from FY20-21) in English label IMF. Exiting the loss making US assets or navigating a turnaround at the MVM asset would likely accelerate this turnaround. We do not see the current share price as reflecting this potential.”

All in all, the broker appears to see this as a buying opportunity for investors.

Should you invest $1,000 in A2 Milk right now?

Before you consider A2 Milk, you'll want to hear this.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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