The A2 Milk Company Ltd [ASX:A2M] looks unstoppable at this point, with the New Zealand-based company continuing to push up to new all-time highs.
With a market cap of $14.12 billion and share price trading at $19.08 at time of writing, looking at the last five years, a2 Milk looks to have found its niche and turned itself into a profit machine.
Source: Optuma
A2M share price went on a massive five-year run
A2 Milk was listed on the ASX only five short years ago. In that time, the company rose over 3,238%. Not only is this incredible growth, but taking a look at the chart and considering the current climate of COVID-19, it appears to be holding up remarkably well.
Source: Optuma
The market shuddered in March but how have a2 Milk sailed through relatively unscathed?
To start with, a2 Milk sell baby formula and milk to their customers in New Zealand, Australia, the US and China, with China being a huge market for the company due to high customer demand.
A hungry baby does not know or care if there is a pandemic, nor does a coffee drinker. These kinds of needs have somewhat pandemic-proofed the company.
Taking a look at the financials from Market Screener below, it really shows how well the company is doing.
Source: Marketscreener.com
They hold zero debt, have an increasing net cash position and a high double-digit return on equity (ROE).
With a solid management structure, great marketing, focusing on premium products and distributing to large global markets, a2 Milk is a well-oiled cash cow.
Where to from here for a2 Milk share price?
With the company in good shape, I think it’s reasonable to expect more of the same in the medium term.
Source: Optuma
The last few weeks the price moved sideways.
This move down is on lower volume than usual, indicating there may be a lack of commitment to the move down. Should the price keep falling then the level of $18.40 may provide future support.
If price turns to the upside and cracks the previous all-time high of $20.05, then the higher levels of $21.95 and $22 may provide future resistance.
Regards,
Carl Wittkopp
For The Rum Rebellion
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