CSL Limited (ASX: CSL) has rallied to a brand-new all-time high this week of $87.46. The share price gains take the market capitalisation of Australia's leading bio-pharmaceutical company to a massive $41 billion.
With CSL's share price having gained around 35% since August, shareholders and followers alike must be starting to wonder if the stock's rapid accent will begin to run out of puff in 2015?
It's certainly a fair question considering shares in the blood products and vaccine manufacturer are trading on an FY 2016 consensus forecast price-to-earnings (PE) ratio of 22.5x, yet earnings per share (EPS) growth of just 8.1% is expected.
In CSL's favour however are a number of factors which can not only support the current pricing but potentially see it move even higher.
Firstly, the quality of this company is high. It has a strong balance sheet and has successfully created shareholder value for many years.
Secondly, the high certainty of earnings makes the dividend not only reliable and dependable but scope for an increased pay-out in the future is also possible.
Thirdly, at the company's recent Research and Development Investor Briefing management highlighted that CSL will push to gain approvals and enter new markets with its leading haemophilia therapy. This is a big market and could meaningfully add to both the top and bottom lines.
CSL isn't alone when it comes to providing strong returns for shareholders in 2014. Private hospital operator Ramsay Health Care Limited's (ASX: RHC) share price has gained 28% this calendar year with the stock also trading at a record high. It's also trading on a hefty multiple with an FY 2016 PE of 24.6x and forecast EPS growth of 13.7%.
While both of these stocks would certainly appear pricey, given the outlook for the wider economy it is likely that investors will continue to price these health care stocks at a significant premium and that they will see further buying support.
