Snoopy, ATM have a plan to enter the NZ fresh milk market, have a quick look back at their last few presentations. As I understand, It’ not so much that A2 milk hasn’t taken off in NZ, it’s more that ATM own the IP and have been reserving significant entry thus far while they tackle larger and more lucrative global markets.
Growth stocks are not easily valued and PE shouldn’t be considered as a primary tool in isolation at this stage in a business cycle. Unlike other start-ups in the dairy sector at present ATM is both investing heavily in growth, and, also generating modest profits at the same time, hats off to them.
Average revenue in the last two years was 45% and if ATM meet their expectation of achieving $280M in revenues by FY16 then this also provides us with a forward revenue growth rate of 45% for the next four years.
The challenge in valuing ATM, as I see it, is in estimating where forward top to bottom line margins will ramp up to over the next few years.
ATM have a unique business model with a mix of direct production, contract production, joint ventures and direct sales which does make it difficult to assess forward profitability. However, the common thread is the additional margins generated by owning the intellectual property and through having a niche product which demands a higher over the counter sales price above and beyond all their competitors.
It would seem that most would value ATM higher than yourself, each to their own, but I suspect you will be waiting for a very long time indeed if you really do expect to see ATM at $0.20 or anywhere near to it.
Mac