a2 Milk (NZSE:ATM) - Share price, News & Analysis

Q: What is the Fair Price of ATM when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

ATM (NZ$4.93) is trading below our estimate of [[fair value]] (NZ$9.7)

ATM fundamental analysis
Snowflake Score
Valuation	3/6
Future Growth	4/6
Past Performance	1/6
Financial Health	5/6
Dividends	0/6

ATM Stock Overview

The a2 Milk Company Limited, together with its subsidiaries, sells A2 protein type branded milk and related products in Australia, New Zealand, China, other Asian countries, and the United States.

Rewards

Trading at 49.2% below our estimate of its fair value

Earnings are forecast to grow 23.03% per year

Risk Analysis

Large one-off items impacting financial results

Profit margins (1.7%) are lower than last year (20%)

a2 Milk Competitors

Fonterra Co-operative Group

NZSE:FCG

NZ$4.7b

Danone

ENXTPA:BN

€33.2b

Synlait Milk

NZSE:SML

NZ$682.0m

Bubs Australia

ASX:BUB

AU$370.7m

Price History & Performance

Summary of all time highs, changes and price drops for a2 Milk
Historical stock prices
Current Share Price	NZ$4.93
52 Week High	NZ$7.88
52 Week Low	NZ$4.20
Beta	-0.082
1 Month Change	-5.19%
3 Month Change	-12.28%
1 Year Change	-25.64%
3 Year Change	-67.02%
5 Year Change	25.77%
Change since IPO	516.25%

Recent News & Updates

Jun 21

We Think a2 Milk (NZSE:ATM) Can Stay On Top Of Its Debt

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says...

May 15

Capital Allocation Trends At a2 Milk (NZSE:ATM) Aren't Ideal

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll...

Feb 27

Does a2 Milk (NZSE:ATM) Have A Healthy Balance Sheet?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the...

Shareholder Returns

	ATM	NZ Food	NZ Market
7D	4.7%	3.0%	1.4%
1Y	-25.6%	-23.7%	-17.1%

Return vs Industry: ATM underperformed the NZ Food industry which returned -23.7% over the past year.

Return vs Market: ATM underperformed the NZ Market which returned -17.1% over the past year.

Price Volatility

Is ATM's price volatile compared to industry and market?
ATM volatility
ATM Average Weekly Movement	6.2%
Food Industry Average Movement	4.2%
Market Average Movement	4.5%
10% most volatile stocks in NZ Market	8.7%
10% least volatile stocks in NZ Market	3.0%

Stable Share Price: ATM is not significantly more volatile than the rest of NZ stocks over the past 3 months, typically moving +/- 6% a week.

Volatility Over Time: ATM's weekly volatility (6%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
2000	335	David Bortolussi	https://www.thea2milkcompany.com

The a2 Milk Company Limited, together with its subsidiaries, sells A2 protein type branded milk and related products in Australia, New Zealand, China, other Asian countries, and the United States. The company offers fresh milk under the a2 Milk brand; and infant formula under the a2 Platinum brand. The company was formerly known as A2 Corporation Limited and changed its name to The a2 Milk Company Limited in April 2014.

a2 Milk Fundamentals Summary

How do a2 Milk's earnings and revenue compare to its market cap?
ATM fundamental statistics
Market Cap	NZ$3.67b
Earnings (TTM)	NZ$20.24m
Revenue (TTM)	NZ$1.19b

181.2x

P/E Ratio

3.1x

P/S Ratio

Is ATM overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
ATM income statement (TTM)
Revenue	NZ$1.19b
Cost of Revenue	NZ$713.56m
Gross Profit	NZ$474.66m
Other Expenses	NZ$454.42m
Earnings	NZ$20.24m

Last Reported Earnings

Dec 31, 2021

Next Earnings Date

Aug 30, 2022

Earnings per share (EPS)	0.027
Gross Margin	39.95%
Net Profit Margin	1.70%
Debt/Equity Ratio	7.0%

How did ATM perform over the long term?

See historical performance and comparison

We’ve recently updated our valuation analysis.

Valuation

Is ATM undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

Price-To-Sales vs Peers
Price-To-Sales vs Industry
Price-To-Sales vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for ATM?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for ATM. This is calculated by dividing ATM's market cap by their current preferred multiple.
What is ATM's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	NZ$3.67b

ATM key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	2.6x
Enterprise Value/EBITDA	62.9x
PEG Ratio	7.9x

Price to Sales Ratio vs Peers

How does ATM's PS Ratio compare to its peers?

ATM PS Ratio vs Peers

The above table shows the PS ratio for ATM vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PS	Estimated Growth	Market Cap
Peer Average	2.3x
FCG Fonterra Co-operative Group	0.2x	n/a	NZ$4.7b
BN Danone	1.4x	4.5%	€33.2b
SML Synlait Milk	0.5x	4.8%	NZ$682.0m
BUB Bubs Australia	6.8x	30.9%	AU$370.7m
ATM a2 Milk	3.1x	11.0%	NZ$3.7b

Forward PS

Price-To-Sales vs Peers: ATM is expensive based on its Price-To-Sales Ratio (3.1x) compared to the peer average (2.2x).

Price to Earnings Ratio vs Industry

How does ATM's PE Ratio compare vs other companies in the Oceanian Food Industry?

Price-To-Sales vs Industry: ATM is expensive based on its Price-To-Sales Ratio (3.1x) compared to the NZ Food industry average (0.7x)

Price to Sales Ratio vs Fair Ratio

What is ATM's PS Ratio compared to its Fair PS Ratio? This is the expected PS Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

ATM PS Ratio vs Fair Ratio.
Fair Ratio
Current PS Ratio	3.1x
Fair PS Ratio	3.2x

Price-To-Sales vs Fair Ratio: ATM is good value based on its Price-To-Sales Ratio (3.1x) compared to the estimated Fair Price-To-Sales Ratio (3.2x).

Share Price vs Fair Value

What is the Fair Price of ATM when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: ATM (NZ$4.93) is trading below our estimate of fair value (NZ$9.7)

Significantly Below Fair Value: ATM is trading below fair value by more than 20%.

Price to Earnings Growth Ratio

PEG Ratio: ATM is poor value based on its PEG Ratio (7.9x)

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Future Growth

How is a2 Milk forecast to perform in the next 1 to 3 years based on estimates from 14 analysts?

Future Growth Score

4/6

Future Growth Score 4/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

23.0%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: ATM's forecast earnings growth (23% per year) is above the savings rate (2.1%).

Earnings vs Market: ATM's earnings (23% per year) are forecast to grow faster than the NZ market (6.9% per year).

High Growth Earnings: ATM's earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: ATM's revenue (11% per year) is forecast to grow faster than the NZ market (6.6% per year).

High Growth Revenue: ATM's revenue (11% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: ATM's Return on Equity is forecast to be low in 3 years time (13.8%).

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Past Performance

How has a2 Milk performed over the past 5 years?

Past Performance Score

1/6

Past Performance Score 1/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

8.0%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: ATM has a large one-off loss of NZ$10.4M impacting its December 31 2021 financial results.

Growing Profit Margin: ATM's current net profit margins (1.7%) are lower than last year (20%).

Past Earnings Growth Analysis

Earnings Trend: ATM's earnings have grown by 8% per year over the past 5 years.

Accelerating Growth: ATM's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: ATM had negative earnings growth (-93.7%) over the past year, making it difficult to compare to the Food industry average (4.8%).

Return on Equity

High ROE: ATM's Return on Equity (1.5%) is considered low.

Discover strong past performing companies

Financial Health

How is a2 Milk's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: ATM's short term assets (NZ$1.0B) exceed its short term liabilities (NZ$387.4M).

Long Term Liabilities: ATM's short term assets (NZ$1.0B) exceed its long term liabilities (NZ$78.4M).

Debt to Equity History and Analysis

Debt Level: ATM has more cash than its total debt.

Reducing Debt: Insufficient data to determine if ATM's debt to equity ratio has reduced over the past 5 years.

Debt Coverage: ATM's debt is well covered by operating cash flow (246.2%).

Interest Coverage: ATM earns more interest than it pays, so coverage of interest payments is not a concern.

Balance Sheet

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Dividend

What is a2 Milk current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

1.38%

Forecast Dividend Yield

Dividend Yield vs Market

Notable Dividend: Unable to evaluate ATM's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate ATM's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.

Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if ATM's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if ATM's dividend payments have been increasing.

Earnings Payout to Shareholders

Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as ATM has not reported any payouts.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

1.2yrs

Average management tenure

CEO

David Bortolussi (52 yo)

1.25yrs

Tenure

NZ$2,209,599

Compensation

Mr. David L. Bortolussi, BComm, FFin, FCA serves as Advisory Board Member at Whiteoak Pty Ltd. He served as Group President of Innerwear International at Hanesbrands Inc. since April 2019 until February 6,...

CEO Compensation Analysis

Compensation vs Market: David's total compensation ($USD1.37M) is about average for companies of similar size in the NZ market ($USD1.45M).

Compensation vs Earnings: Insufficient data to compare David's compensation with company performance.

Leadership Team

Experienced Management: ATM's management team is not considered experienced ( 1.2 years average tenure), which suggests a new team.

Board Members

Experienced Board: ATM's board of directors are considered experienced (4.4 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/30 00:00
End of Day Share Price	2022/06/30 00:00
Earnings	2021/12/31
Annual Earnings	2021/06/30