A2 Milk Company Ltd (ASX: A2M) and Webjet Limited (ASX: WEB) are two companies that I always have on my watch list. This is because of strong business fundamentals, product metrics and international presence.
Recently, both companies experienced a drop in their stock price. At these prices, I think they are an attractive buy opportunity in anticipation of FY earnings.
a2 Milk
a2 Milk is an Australian company that sells A1 protein-free fresh milk and infant formula products. It has seen its share price sink 6.3% in the last month, for a $14.96 close on Friday, although those that have been holding this stock for the year would have amassed a 43.8% return.
A note by Goldman Sachs was released recently, with analysts retaining a buy rating on the stock with a $15.60 price target. Though sales in the infant formula market overall fell 5%, a2 Milk's daigou channels (the e-commerce channel between mainland Chinese buyers and overseas professional shoppers) grew exceptionally. For instance, a2 Milk's Tmall.com (formerly Taobao Mall) sales grew 269% over the prior corresponding period. This distribution channel is key to what makes a2 Milk stand out among competitors like Bellamy's Australia Ltd (ASX: BAL).
The company is also gearing up to launch a new product called a2 Smart Nutrition. This is a powdered milk that doesn't contain A1 casein protein, which is particularly attractive for Chinese consumers. With this product going to market, a2 Milk expects to capture 6% of market share this year, up 0.6% from December 2018.
Webjet
Webjet is both a B2C and B2B digital travel agency. It enables users to compare and combine flights, accommodation, packaged holiday deals, insurance and hire cars domestically and internationally.
Webjet's share price sunk 11.5% to a $15.01 close last Friday, from highs of $16.87 the week prior. This was a result of its UK partner, Thomas Cook, having amassed huge losses followed by three profit warnings in the last year. Webjet entered a supply agreement with the company to service its European online accommodation and complementary hotel business.
Despite these concerns, there is no evidence of this having any impact on Webjet's full-year performance and the company's $120 million EBITDA guidance hasn't budged.
I still have confidence in Webjet's B2B platform, WebBeds, to drive strong growth for the company. Its EBITDA grew 135.2% to $30.1 million in just 6 months to December 2018. Webjet itself amassed a whopping 42% growth in EBITDA to $58 million to secure the second largest market share in the B2B travel industry.
While Webjet is unlikely to return another 50% in the next 5 months, I'm a firm believer in its digital strategy and aggressive growth tactics in the B2B travel space.
However, if these two stocks aren't for you, perhaps you should consider looking at this high-growth stock below.
