We don't expect MG to grow but....

The noise and heated debates, on A2M and BAL, extending to telecom firms, TPM/VOC all have a common theme, "a growing company slows down". As growth companies got hammered by lower growth forecast and unsustainable valuation.

In fact, the average long-term growth rate for companies normally ranged from 3%-5%, as Australia GDP grows at 1-2%(possibly worse this year). Even, CSL only manages growth of 10-15%.
The risk with high growth firms is that most of the investors don't know when the market will start to saturate and how to tell if the company reaches mature stage from an infant, high-growth startups.

To me, the lesson from BAL is that no matter how great a company is, we should not expect a company to grow at the same rate, because the bigger it gets, the harder to grow. The fact that Bellamy has gained significant market share in Australia "Fairfax Media reveals that Bellamy's market share plunged from 25 per cent of the domestic infant formula sales in April to just 12 per cent by October. " , the 25% market share should have been a message to the investors that BAL is great but will likely to face competition in a mature baby formula industry. Growing from "12% to 25%" might be easy for BAL, but how about from "25% to 50%", exactly the same growth rate in both scenario, yet as it reaches 25%, doubling market share seems impossible in the short term. Unfortunately, the market valuation is still expecting blue-sky growth, partially blamed on the lack of accurate forecast from the management, who should know better than anyone about the growth. But, in the end, it's investor's money, investors are the ones who should look even closer , than the management, at the underlying performance of the company and industry.

Moving to MG, trading below book value, with PE probably close to single digit (if you include dividend franking) in the same industry as BAL/A2 but more diversified, also present in cheese, ingredient business.
While none of these metrics are very useful in determining if MG is a good investment, because it's the future earning and growth which matter.

Clearly, market does not expect MG to grow at all, with dividend already at about 10% and I don't expect its revenue to grow either. But, I do expect its earning to grow. With revenue of $2.8 billions, MG turned only $40 millions (margin of 1.4%), while Fonterra sits at 5%. Though they are still different firms, but they share similar structures, similar industry.

To me, I am not too greedy and happy with current level of dividend from MG,
even more when I see a high probability of operational improvement and higher margin out of $2.8 billions revenue.
Best part about long-term investing in mature business is that you get to collect significant, consistent stream of cash flow(intrinsic value) from the business(perhaps at 7 or 10%) and don't even have to worry about share price, because more than 99% of your profit comes from the cashflow/dividend. It makes no difference if MGC trades at $10 or 1c after 30 or more years, which is the reason why value-investing almost always occurs on a long-term horizon. This is the basis of intrinsic value investing aka Discount Cash Flow analysis.

For short-term investors, share price plunge is definitely a sell sign to stop loss.
For value-investors, if you know your number (i.e. the probable cash flow from the business over the long term), you should know the value and whether the business is a bargain or overpriced.
When a bargain comes, just buy and hold