The share price of biotechnology company CSL Limited (ASX: CSL) reached a record high of $227.40 during Tuesday's trading session. The company's share price has now risen 12% following the release of its full-year result for FY18 on August 15.
With CSL trading at all-time highs, is it time for investors to buy shares in one of Australia's best blue chips?
Another brilliant year
For the year ended 30 June 2018, CSL delivered a 14% increase in revenue to US$7,915 million with EBIT margins climbing from 25.6% to 30.1% resulting in net profit after tax growth of 29% to US$1,729 million.
At constant currency, CSL posted a net profit of US$1,713 million. This exceeded the initial FY18 guidance provided last August of US$1,480 million to US$1,550 by 13% at the midpoint.
The main catalyst for the great result was the company's plasma therapies division, CSL Behring. The division saw product sales up 11% to US$6,678 million and EBIT margins increased from 32.5% to 34.1%.
The standout performers were from Privigen and Hizentra in immunoglobulins and the recently launched Haegarda in specialty products. Haegarda is used to treat hereditary angioedema and has already taken ~50% of the U.S. prophylactic market share. According to CSL, Haegarda has been the most successful chronic drug launch in the United States in the past 5 years.
Pleasingly, CSL's vaccine division Seqirus managed to deliver its maiden profit with EBIT of US$52 million compared to last year's EBIT loss of US$179 million.
Foolish takeaway
At constant currency for FY19, CSL has guided for revenue growth of 9% and net profit after tax to increase by 10-14% in the range of US$1,880 million to US$1,950 million. In FY18, CSL delivered underlying earnings per share of US$3.79(A$5.16). Using the midpoint of 12% net profit growth in FY19 would see CSL deliver earnings of around ~A$5.78 at current exchange rates, and prices the stock on a forward valuation multiple of 39.
This is a higher forward valuation multiple than CSL has traded for in recent times and reflects the market's current bullishness towards growth stocks in particular. CSL is a great business that warrants a material premium to the general Australian market, similarly to other healthcare companies such as Cochlear Limited (ASX: COH) and ResMed Inc (ASX: RMD).
However, the fear of missing out can lead to investors bidding up prices to overbought levels and overpaying for an otherwise fundamentally sound company whose bullish thesis remains intact. Thus, I am not a buyer of CSL shares at current prices and view the company as a hold from a valuation perspective.
