A2M share price in focus
Founded in New Zealand in 2000, The a2 Milk Company sells dairy products which contain the naturally occurring A2 protein type. Most other dairy products on the market contain the A1 protein, which is claimed to be harder to digest for some people.
The company is responsible mainly for distribution and marketing, with the production outsourced to suppliers who source from over 25 certified dairy farms across Australia. A large part of the a2 business is infant formula, which is produced by its supply partner Synlait Milk in New Zealand.
While the science is a little uncertain on why a2 milk might be easier to digest, randomised studies have repeatedly shown that it is an effective solution for many people who struggle with ‘normal’ dairy products.
ALL shares
Aristocrat Leisure is an Australian gambling machine operator headquartered in Sydney. It was founded by Len Ainsworth in 1953
Today, Aristocrat is the largest gambling machine manufacturer in Australia and one of the largest manufacturers of slot machines in the world. However, the business has diversified over the years and now also makes online mobile games. This segment has grown steadily to now make up nearly half of the company’s revenue.
The gaming machines Aristocrat make can be sold outright to a venue or gaming operator. Alternatively, a machine can be installed with a proportion of the revenue generated being paid on a recurring basis back to Aristocrat.
A2M share price valuation
As a growth company, one way to put a broad projection on the A2M share price could be to compare its price-to-sales multiple over time. This can tell us how the company has historically been valued relative to its total revenue.
Currently, A2 Milk Company Ltd shares have a price-sales ratio of 2.96x, compared to its 5-year average of 3.44x, meaning its shares are trading lower than their historical average. This could mean that the share price has fallen, or sales have increased, or both. In the case of A2M, revenue has been growing over the last 3 years. Of course, context is important – and this is just one valuation technique. Investment decisions can’t just be based on one metric, but this can be a rough starting point.
The ALL share price currently trades at a price-sales ratio of 6.55x, which compares to its 5-year long-term average of 4.87x. So, its shares are trading above their historical average. Don’t forget, a simple multiple like this should only be the start of your research. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! It’s a good idea to use multiple valuation methods to value a share like Aristocrat Leisure Limited.
