The Nuchev Limited (ASX: NUC) share price has been a standout performer on the ASX this week.
Earlier today the goat milk infant formula company's shares raced a massive 22.5% higher to reach a record high of $4.17.
When Nuchev's shares hit that level, it meant they had gain a remarkable 60% since listing on the ASX on Monday at $2.60 per share.
What is Nuchev?
Nuchev is an infant formula company that was founded in 2013 by the co-founder of Synlait Milk Ltd (ASX: SM1), Ben Dingle.
Synlait Milk is the processing partner of infant formula giant A2 Milk Company Ltd (ASX: A2M).
Its key products are its Oli6 branded goat milk infant formula range, which has been formulated specifically for the needs of infants and children. Management notes that the potential health benefits of the range are supported by scientific laboratory research published by RMIT University researchers.
Nuchev is targeting the Chinese goat milk infant formula market, which is forecast to grow at a compound annual growth rate of 18.8% from 2018 to 2023. This means it will be worth a sizeable $9.2 billion by 2023 and represents 12.8% of the total Chinese infant formula market.
This certainly gives the company a long runway for growth over the coming years. In FY 2019 Nuchev delivered revenue of $9.5 million and gross profit of $4 million.
Management expects to almost double this in the current financial year. Its prospectus guidance for FY 2020 is for revenue of $18 million and gross profit of $6.8 million. This is still only scratching at the surface of its overall market opportunity.
Should you invest?
According to its prospectus, there are a total of 45 million shares on issue at present. This gives Nuchev a market capitalisation of approximately $180 million. Which means its shares are now changing hands at 10x forecast FY 2020 revenue.
As a comparison, in the first quarter its rival Bubs Australia Ltd (ASX: BUB) posted revenue of $14.2 million. Annualised this becomes $56.8 million. Which means its shares are changing hands at a touch under 9x forward sales.
In light of this, I would say Nuchev's shares are probably fully valued now and will be staying on my watchlist.
