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Is CSL a buy?

When it comes to investing in health care, it’s hard to go past CSL (ASX: CSL).

CSL is a global, specialty biopharmaceutical company. It develops, manufactures and markets therapies to treat and prevent a broad range of human medical conditions. With more than 90 years of experience, CSL has made outstanding contributions to medicine and human health in the development and manufacture of vaccines and plasma protein biotherapies.

CSL was established in Australia in 1916. It was then incorporated in 1991 and listed on the Australian Stock Exchange in 1994. With major facilities in Australia, Germany, Switzerland and the US, CSL has over 10,000 employees working in 27 countries. In recent years CSL has expanded by acquiring a number of businesses, including CSL Behring. The latter can trace its corporate roots back to Emil von Behring, an innovator with serum therapies who won the first Nobel Prize in Physiology and Medicine in 1901.

High attention is paid to new product development and life-cycle management of such products. CSL invests in the development of protein-based medicines for treatment of serious human diseases.  Of particular note, CSL manufactures and provides influenza vaccine globally. In general, it has the manufacturing and distribution capability to meet demand for millions of vaccines in expectation of worldwide pandemic outbreaks.

CSL is an innovative global company.  It seeks to retain its competitive position by extracting the highest financial yield from blood products. Research on extending the use of blood plasma products is central to ongoing success of the company. Development of higher margin products, that are branded, is a cornerstone of its business model. With a strong balance sheet, CSL continually invests in promising biotechnology within its field of expertise, moving acquisitions from the laboratory to the market.

This financial year sales of US$5.0 billion are up 10%; EBIT of US$1.5 billion is up 19%; and EPS of US$2.44 is up 26 %. These percentage figures are reported in constant currency, which removes the impact of exchange rate movements to facilitate comparability.

A few years ago CSL had a 3 for 1 share split, and the shares today are selling for an equivalent price, meaning a tripling in shareholder value before taking into account the dividends, which themselves are substantial.

Foolish takeaway

With return on equity at 40.4%, CSL is a massive money-making machine.

Other factors favouring the shareholder are the current buy-back program and any downward move in the Australian dollar with respect to the US dollar.

With a fantastic track record since listing on the ASX, increasing health care demand and a supposedly falling Australian dollar, CSL is one for the long-term portfolio.

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Motley Fool contributor Chris Koenig does not own shares in CSL.

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