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CSL Limited: Is now the right time to buy?

The ASX has had enough pain from the weak iron ore market, but now it may be energy stocks that start to sag if world oil prices stay under $80 a barrel for some time. The S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) has started to head back down again.

The Aussie dollar is down and the economic outlook isn’t so cheery. It doesn’t feel like 2015 will start with a bang, except for share prices going down with a thud.

It’s very different in the U.S. because now the economy there is growing at about 3.9%, based on upwardly revised figures. The U.S. Fed wants to keep interest rates low to keep the stimulus going, but the U.S. dollar is on the rise because it is looking better than most other currencies.

Investors could benefit if they hold ASX stocks that do a lot of business overseas. U.S. dollar denominated profits will convert into more Aussie dollars and better business conditions overseas can help keep earnings growing.

What stocks might be good for this situation?

One of them is CSL Limited (ASX: CSL), the biopharmaceutical company that specialises in blood related medical products, as well as vaccines for viral and bacterial diseases. This international business only gets about 10% of its revenue from Australia.

Blood plasma and vaccines

Two good business developments have happened recently. First, it is seeing an increase in demand for its blood plasma products like albumin, especially from China. Rising urban populations mean there are more people needing surgery. CSL Limited is increasing production at new facilities to meet this demand.

Also, it has just acquired the influenza vaccine business of a major Swiss pharmaceutical company, which will make CSL the world’s second-largest flu vaccine producer. Vaccines are always in demand due to the various flu strains that develop over time.

Steady earnings growth

The company is expected to grow earnings on average about 15% annually over the next two years. The stock is near new 52-week highs and has climbed about 25% since August. Its 25 PE ratio might seem a little high for the projected earnings growth, but I would look more at the long-term growth prospects from becoming a bigger global player and expanding business in China and Asia.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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