The A2 Milk Company Ltd (ASX: A2M) share price continues to kick goals for investors.
Shares in the Kiwi dairy group fell 2.1% lower yesterday but remain up 39.1% for the year. A $10,000 investment in A2 Milk in early April 2015 would be worth a tidy $348,214 today.
However, I prefer to look to the future instead of the past with my investments. That means I’ve got my eye on the A2 Milk share price ahead of its full-year earnings result on 19 August.
Is the A2 Milk share price overvalued?
The A2 Milk share price is trading just 2.7% below its all-time high of $20.05.
That could mean it has been overbought by investors seeking to get extra cash into the market. However, I think there are enough strong, underlying share price drivers to warrant further exploration.
What was in the half-year result?
There’s also not too much that can be drawn from the company’s February half-year results given the changing global landscape.
A2 Milk posted half-year revenue up 31.6% to $806.7 million with EBITDA climbing 20.5% to $263.2 million.
That result was underpinned by strong growth in China label infant nutrition and United States milk revenue. Given China’s strong bounce back from the coronavirus pandemic, we could see further sales growth in these segments in August.
The company’s April trading update also gave investors some confidence about the full-year numbers. A2 Milk reported strong sales revenue growth across all key regions despite uncertainty for both revenue and earnings forecasts.
A2 Milk’s full-year EBITDA margin is expected to land between 31-32% for FY20. Currency impacts will also be worth watching given the volatility in the Australian, New Zealand and US dollars in 2020.
What is there to like about the A2 Milk share price?
One thing I like about the A2 Milk share price is its aggressive expansion plans. A2 Milk is looking to take the brand further abroad into the Canadian market.
Given its strong track record of strategy execution, I’m quietly hopeful about its Canadian plans.
A2 Milk has also continued to expand through increased investment in Synlait Milk Ltd (ASX: SM1).
A2 Milk now owns 19.84% of its fellow Kiwi dairy producer. While I wouldn’t call that diversification as such, I think it could generate a new growth corridor for A2 Milk going forward.
I also think recent strong supermarket sales bode well for a robust A2 Milk result in August.
Foolish takeaway
All in all, I’m quietly bullish on the company’s August full-year result. The A2 Milk share price has already climbed higher in 2020 but a strong result could see it hit a new record high next month.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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