Is CSL Limited’s (ASX:CSL) share price heading back above $200?

The share price of CSL Limited (ASX: CSL) jumped on Wednesday after management reiterated its rosy outlook at the blood products supplier’s annual general meeting.

The stock increased 2.5% to $193 as the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index gained 1.2% yesterday.

CSL wasn’t the only high-growth stock trading at a premium that found favour with investors. A better than expected result from US tech darling Netflix has reignited interest in growth stocks with RESMED/IDR UNRESTR (ASX: RMD), Cochlear Limited (ASX: COH) and Altium Limited (ASX: ALU) jumping over 3% each.

While I favour value stocks over growth as we head into year-end, at least there’s some level of confidence that CSL will post a double-digit increase in earnings with management reiterating its 10% to 14% net profit growth target for FY19 on a constant currency basis.

CSL may deliver a better than expected result when expressed in Australian dollars if the greenback continues to strengthen into 2019.

Management also painted an upbeat outlook as it noted that demand for plasma and recombinant products remains strong in the new financial year and that margins from a number of its products like HELIXATE are expected to expand.

Another piece of good news is that CSL’s highly regarded ex-chief executive Brian McNamee is returning to take over the chairman position from John Shine.

CSL has grown phenomenally under McNamee’s reign as he took the company from a $300 million market cap entity when it listed on the ASX in 1994 to nearly $50 billion when he stepped down from the CEO role in 2013.

One factor that’s holding back growth is constrained supply of blood plasma from its US collection centres even as the company looks to open up to circa 35 more centres in the current financial year.

Collected plasma is processed to make therapies for immunodeficiency diseases and haemophilia.

While CSL is one of the market darlings that I have great affection for, the fact that it’s trading on an FY19 consensus price-earnings (P/E) multiple of 44 times is keeping me from buying the stock.

As I have written before, I think high P/E stocks will lag behind value stocks as we enter into the next phase of the bull market as higher bond yields are a bigger challenge for expensive growth stocks.

I won’t rule out CSL hitting $200 a share before the end of the calendar year but I think other blue-chip stocks are better placed to generate a superior return.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. 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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