After hitting an all-time high of $121.25 in July, shares in CSL Limited (ASX: CSL) crashed sharply after the company released its annual report, falling as low as $101 at the close of trade last week. Unfortunately for shareholders, I don’t think the company will be headed back to $120 in the near future.

Why?

There’s a few reasons behind my above statement, with the first being that CSL appeared overpriced. At $120 the company was trading on around 36 times earnings, which is pretty lofty given that underlying Net Profit After Tax grew just 5% in the past 12 months.

Secondly, CSL also noted in its report that it was experiencing increased competition in some markets, and its marketing spend increased by 25%, probably partly due to new product launches.

CSL produces life-saving products that consequently aren’t very difficult to sell. However, when there’s two products with similar efficacy competing for sales, then marketing becomes important which is why comments around competition and the higher marketing expenses caught my eye.

With that said…

CSL remains a great company. However, the unprofitable Seqirus business is chewing up money and should begin contributing to earnings in 2018. While, ongoing share buybacks as well as very high levels of research & development spending will contribute positively to shareholder returns over time.

CSL is able to reinvest in itself very effectively and has a great balance sheet – in fact, I recently selected it as one of my top 3 picks for investors for whom financial stability was a paramount consideration.

A couple of directors have also been buying shares recently, and CSL now trades for 20% below its all-time high. While I don’t think the company will be headed back to $120 in a hurry, I also consider it pretty likely that it will get there eventually. CSL is starting to look interesting at today’s prices.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.