Shares of CSL Limited (ASX: CSL) have rocketed today, with the stock lifting 1.6% to $97.79.
Boasting a market capitalisation of nearly $45 billion, CSL is a global biopharmaceutical giant specialising in blood products and various other human medical conditions.
As an example, the company's proposed acquisition of Novartis' global influenza business for US$275 million (which it expects to complete by 31 December 2015, subject to regulatory approvals) could see it become the second-largest player in the global influenza vaccine industry, while it is also trying to develop a product for the treatment of haemophilia A – a rare blood disorder.
Although some investors might be turned off the company given its rocketing share price – assuming that it has already run its race – it would pay to look at its historical performance.
Source: CMC Markets
CSL has generated market-smashing returns over the last decade while it has risen extra aggressively since the beginning of 2012, heavily outpacing the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) with a 206% gain. Investors who decided CSL's shares were too expensive at any point during that time have missed out on some remarkable profits.
Indeed, there is every chance that CSL could continue to rise considerably above its current valuation. To begin with, it enjoys sustainable competitive advantages such as strict barriers to entry and enormous scale which should allow it to grow more profitable over time.
At the same time, CSL – like most other healthcare corporations – enjoys defensive revenues. As can be seen in the chart above, CSL's shares remained mostly stable even through the Global Financial Crisis in 2008-09. CSL reported that the GFC had "little to no impact so far on sales of CSL's portfolio of life-saving therapies and essential vaccines" at the time (2009 half-year report).
Should you buy CSL?
To borrow a quote from The Motley Fool's co-founder, David Gardner, "Think about it: What if that same stock that had skyrocketed the year before was instead your college roommate who graduated with honors? What if he landed a premium job and earned big raises for two straight years? Would you suddenly expect him to stop being successful? Of course not."
Although David was specifically referring to companies such as eBay and Amazon.com at the time, I believe the same equally applies to CSL Limited.
Australia's healthcare industry is set to benefit in a big way from the nation's growing and ageing population over the coming years and decades, and CSL is in the box-seat position to profit. With strong international growth prospects as well, CSL could still be a reasonable buy at today's price tag.
