ATM - A2 Milk Corporation Limited

[Snoopy]

Like the Beagle, I doubt if the supply of A2 milk is an issue for the planned production increases.

1.) Would SML have invested in doubling its plant/production without ensuring adequate supply of A2 milk?

I think you are misreading the problem Left Field. The share price has been bid up to an extent that production increases of nearly 300% are already priced in. A production increase of only 100% isn't going to go anywhere near cutting it.

SNOOPY

[Snow Leopard]

Earnings growth for FY2018 to FY2020.

2 x 1.2 x 1.2 = 288%

A 288% incremental increase in the A2 cow herd in just three years is quite a few female calves to born. If half the cows born are female we are talking about...

What A2 herds to be 'brought into the fold'? I don't believe there are any, not fully A2 herds at least, which is what you need...

...Of course this isn't to say that the ATM share price won't go higher on market exuberance. But ultimately the market is a 'weighing machine', not a 'voting machine'. And the weigh in time for A2 milk is coming....

While I contend that your assertions are demonstrably incorrect and that your suppositions are predicated on your preconceived negativity for this stock, a trait which often leads your to post such highly selective slivers of information selected purely on the filter of meeting confirmation bias, and I am confident that the supply issue argument which you attempt to make is but a figment of your imagination...

I not only concur that the current euphoria and trajectory of the share price may continue unabated for some time hence...

But also agree that on the basis of a rational valuation of the weighted averages of a broad range of future profit scenarios over the immediate, post-immediate, intermediate and distant time frames that the current share price is at a significant premium to a sensible appraisal of current worth.

Best Wishes
Paper Tiger

[winner69]

At this rate ATM could have a higher market cap than Fonterra

[Beagle]

The market obviously believes they're in the process of building a great global brand and often prices companies at extremely high PE's, (No PE, look no further than XRO for a great example of that) when its anticipated the growth will be enduring.

Snoopy, I'm not going to claim any dairy expertise but as PT has suggested I think you can be prone to looking for information that confirms your bias, much like you've done with some other companies. Fact is it does keep going up at pace and on strong volumes on both bourses and we're not talking about a small cap company here anymore so there's substantial weight of money that believes the A2 growth story. This stock used to be a shorters / manipulators plaything but I think those with a short interest got burned off a long time ago !

[bull....]

The market obviously believes they're in the process of building a great global brand and often prices companies at extremely high PE's, (No PE, look no further than XRO for a great example of that) when its anticipated the growth will be enduring.

Snoopy, I'm not going to claim any dairy expertise but as PT has suggested I think you can be prone to looking for information that confirms your bias, much like you've done with some other companies. Fact is it does keep going up at pace and on strong volumes on both bourses and we're not talking about a small cap company here anymore so there's substantial weight of money that believes the A2 growth story. This stock used to be a shorters / manipulators plaything but I think those with a short interest got burned off a long time ago !

way back on this thread i used to battle with mac bear vrs the bull when the price used to swing between 48 - 60c back and forth great fun.... so your right shorters are way gone now ... funny if i was still holding my original holding of 200k shares at 50c it would be worth 1.7 million today for a cost of 100k oh well hindsight is a wonderful thing dont hold anymore but it was fun thats for sure

[Beagle]

way back on this thread i used to battle with mac bear vrs the bull when the price used to swing between 48 - 60c back and forth great fun.... so your right shorters are way gone now ... funny if i was still holding my original holding of 200k shares at 50c it would be worth 1.7 million today for a cost of 100k oh well hindsight is a wonderful thing dont hold anymore but it was fun thats for sure

There's a few very sad hindsight stories with this one, Couta1 has one and many others and I have one I haven't shared before either. Those swings you talk about... 48-60 cents weren't fun for everyone. I bought some at 59 cents as a spec and put a 15% stop loss on it and guess what happened when it went under 50 cents...oh well...I console myself I got back in just after it went up through $2. I just try and be grateful for small mercies or fortune the good Lord allows me to enjoy and try and forget about what could have been. Can't help wondering where this train takes shareholders 3-4 years from now but I won't be throwing my ticket away this time !

[hardt]

If the market remains relatively bullish on the backdrop of A2 and infant formula in China, what kind of price will people pay for growth?

Very few stocks have a PEG below 1 and I highly doubt A2 milk will be one of them.

Even with earnings growth significantly tapering off over the next 5 years it still looks good to me.

Most stocks I hold sit around 1.2-2 PEG , I would love to find the NZX average to compare.

ATM.NZX	2017	2018	2019	2020
EARNINGS PER SHARE	12.29	21.18	27.99	34.93
FORWARD PER AT 850	40.13	30.37	24.33	19.54
SP AT 30 x FORWARD PE	635	840	1048	1305
PEG RATIO AT 30 x EARNINGS	0.41	0.93	1.21	1.22
SP AT 40 x FORWARD PE	847	1120	1397	1740
PEG RATIO AT 40 x EARNINGS	0.55	1.24	1.61	1.63
FORWARD EARNINGS GROWTH	72.35%	32.14%	24.81%	24.53%

[winner69]

Hardt - don’t know what the PEG of the NZX but for what’s it worth the ASX All Ords is on a PE of 16 with EPS growth of 12% so a PEG of 1.3

[Beagle]

Pretty sure Craigs mentioned in an NBR article a few weeks back our market on a forward PE of just over 20 and average earnings growth this year was 8% so PEG of 2.5.

I think you make a good point that for the growth expected the shares are not expensive especially when you start looking at the PEG of stocks like FPH and RYM to name just two other NZX10 sized companies with consistent growth, albeit at a much, much lower rate.

It would not surprise me to see this at around $4-$5 in 4-5 years time, (after a 5:1 share split).

[couta1]

Recent punters will be hoping that 4 traders mean target price of $6.14 is wrong, but then again maybe it isn't.