Motley Fool Australia

Why CSL Limited looks like a buy at this share price

Australian and US currency

The CSL Limited (ASX: CSL) share price has taken a hit over the past few weeks, shedding close to 5 per cent since late November.

But CSL shares have gained almost 50 per cent over the past year and are trading for about $140.61.

As such, the recent dip may present investors with a good opportunity.

CSL, with a market cap of about $63.59 billion, develops and markets biotherapies in Australia, Europe, and the United States.

And the medical company has a strong growth history.

In financial year (FY) 2017 CSL reported a net profit after tax on a constant currency basis of about US$1.4 billion on total operating revenue of around US$7 billion.

CSL’s revenue has been steadily increasing over the years, up from the US$5.1 billion the company reported for FY 2013.

And, despite recently announcing that it has entered an agreement to sell its immunohaematology business unit of its Seqirus division for $8.5 million to Paragon Care Ltd. (ASX: PGC), CSL in pressing ahead with expansion plans.

CSL has stated that a new base in the United States is nearly operational. In FY 2017 it expanded its plasma collection centres by 29 locations and now has more than 170 centres in Europe and the United States and is set to boost the production capabilities of its Broadmeadows plant in Victoria, which produces its immune globulin Privigen, among other products.

CSL has also increased its presence in the fast growing immunoglobulin market in China with its acquisition of the plasma fractionator Ruide.

And CSL expects its expansion to translate into profits for FY 2018, projecting an increase of up to 16 per cent on FY 2017’s figure.

As such Credit Suisse analysts, who recently increased their price target on CSL shares to $155, are not the only ones tipping the stock to perform well.

CSL shares look even more appealing since Credit Suisse offered its guidance as the price has come down slightly.

CSL shares are now changing hands for about 36x trailing earnings but may not appear too expensive when compared to another top performing company in the sector, Cochlear Limited (ASX: COH), which sees its shares trade for around 45x earnings.

All this means CSL looks set to continue delivering solid returns in 2018 and, based on the idea that CSL still represents growth potential, its share price does not appear too high.

These Dividend Stocks Could Be Your Next Cash Kings (FREE REPORT)

Motley Fool Australia's Dividend experts recently released a brand-new FREE report revealing 3 dividend stocks with JUICY franked dividends that could keep paying you meaty dividends for years to come.

Our team of investors think these 3 dividend stocks should be a 'must consider' for any savvy dividend investor. But more importantly, could potentially make Australian investors a heap of passive income.

Don't miss out! Simply click the link below to grab your free copy and discover these 3 high conviction stocks now.

Returns As of 6th October 2020

Motley Fool contributor Steve Holland has no position in any of the 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.

Related Articles...