Is the CSL Limited share price a buy?

The CSL Limited (ASX: CSL) share price is almost at its highest of $160, so it’s worth asking if it’s a good idea buying at today’s price.

In my opinion, CSL is the best business in the ASX20 for a variety of reasons, but that doesn’t mean today’s price will generate market-beating returns over the next couple of years.

One of the main reasons I think CSL is such a good business is because of how it’s always investing for the long-term. In the half-year to 31 December 2017 the company spent US$342.9 million on research and development expenses which will hopefully drive future profits.

Another reason why I like CSL compared to other ASX20 shares is that it operates in the healthcare space. The business has defensive earnings because people constantly need plasma products or immunisations. Plus, the government wants to make its population as healthy as possible so is willing to push more of CSL’s products.

The proof is in the pudding, CSL’s results speak for themselves. In its latest half-year result it revealed that total revenue had grown by 13% to US$4.1 billion and reported net profit after tax (NPAT) grew by 35% to US$1.1 billion.

CSL may not have a big dividend yield, but it’s increasing at a good rate every year. Management increased the dividend by 23% in its latest report.

Management have forecast that NPAT will be in the range of US$1.55 billion to US$1.6 billion for FY18.

Foolish takeaway

According to analyst estimates, CSL is trading at 35x FY18’s estimated earnings. This is high compared to other ASX20 shares but it’s generating much stronger growth than the others. CSL would be one of my preferred investments of the ASX20, but I would prefer it to be trading under a price/earnings ratio of 30 before considering investing.

Instead, I’d much rather buy these top blue chips that are growing fast as well.

Top 3 ASX Blue Chips To Buy In 2018

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Motley Fool contributor Tristan Harrison 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 Scott Phillips.

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