ASX share price in focus
ASX Limited operates Australia’s primary national securities exchange. Besides being the place you go to for info on listed companies, ASX offers services behind the scenes including registry, settlement, clearing services, and exchanges for commodities and derivatives.
The company provides access to a variety of different tradeable products, including shares, futures, exchange traded funds (ETFs), managed funds, and real estate investment trusts (REITs).
ASX has a huge competitive advantage over other smaller exchanges due to its large size and established position as the go-to exchange for Australian investors. In fact, many Australian investors probably aren’t even aware that smaller exchanges exist!
A2M shares
Founded in New Zealand in 2000, The a2 Milk Company specialises in dairy products that contain the naturally occurring A2 protein type, sold under the a2 brand.
The company does not produce its products directly but partners with over 25 certified dairy farms across Australia, where suppliers handle the production. Additionally, its instant formula products are manufactured by its supply partner, Synlait Milk, in New Zealand.
A key selling point of a2 Milk is its claimed health benefits, particularly its easier digestibility compared to regular milk. This makes it a suitable option for people who typically experience digestive issues with standard milk.
ASX share price valuation
As a growth company, one way to put a broad estimate on the ASX 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, ASX Ltd shares have a price-sales ratio of 8.34x, compared to its 5-year average of 8.12x, meaning its shares are trading above their historical average. This could mean that the share price has increased, or that sales have declined, or both. In the case of ASX, 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 A2M share price currently trades at a price-sales ratio of 3.00x, which compares to its 5-year long-term average of 3.44x. So, A2M shares are trading lower than 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 A2 Milk Company Ltd.
