A2 Milk Company Ltd (ASX: A2M) shares were the talk of the town in February.
During the month, the infant formula company's shares were the best performers on the ASX 200 index with a stunning 35% gain.
This was despite the ASX 200 index falling a disappointing 4.2% over the period.
Why did A2 Milk shares rocket in February?
Investors were scrambling to buy the company's shares last month following the release of its half year results.
For the six months ended 31 December, A2 Milk recorded a 10.1% increase in revenue to NZ$893.8 million. This was driven by continued growth in the China & Other Asia segment, supported by double-digit growth in the USA segment and a jump in Mataura Valley Milk (MVM) revenue.
A2 Milk's first half EBITDA increased by a more modest 5% to NZ$118.9 million due to a softer margin. However, this was consistent with its previous guidance and was driven by the impact of temporary supply constraints and incremental airfreight costs.
On the bottom line, the company revealed a 7.6% increase in net profit after tax to NZ$91.7 million.
And much to the delight of long term shareholders, A2 Milk announced its first ever dividend. It declared a fully franked interim dividend of 8.5 NZ cents per share which will be paid to eligible shareholders early next month.
Guidance upgrade
But the big news was that management expects its second half to be stronger and has upgraded its guidance for the full year.
It now expects revenue growth in the low to mid double-digits, which is up from its previous guidance of mid to high single-digit growth.
In addition, A2 Milk's EBITDA margin is now expected to be slightly up year on year. This compares to its previous guidance of its margin being broadly in line.
Is it too late to invest?
Unfortunately, it could now be too late to invest. That's because the major brokers all agree that A2 Milk shares could now be fully valued.
For example, Ord Minnett has an accumulate and $7.70 price target on its shares and the team at Macquarie has an outperform rating and $7.85 price target on them. Both are lower than where its shares last traded.
It is also worth noting that Morgans has a hold rating and $6.87 price target on the company's shares. This implies potential downside of 14% for investors over the next 12 months.
