Is the CSL Limited (ASX: CSL) share price a buy?
Earlier this week the biotechnology business reported its half year result. It reported a decent 11% increase of revenue in constant currency terms to US$4.5 billion.
CSL's earnings before interest and tax (EBIT) increased by 6% to US$1.55 billion in constant currency terms and earnings per share (EPS) went up 10% to US$2.56 in constant currency. The interim dividend was increased by 8% to US$0.85 per share.
Overall this was a solid result and the company is now expecting its net profit after tax (NPAT) to be at the upper end of its previously guided range of US$1.88 billion to US$1.95 billion. CSL has a habit of delivering at the high of end expectations.
Most of its product lines are doing well. Privigen sales were up 17%, Hizentra sales were up 14%, IDELVION sales were up 55%, Haegarda sales more than tripled, Kcentra sales were up 19% and seasonal influenza vaccine sales were up 23%.
An important part to CSL's continuing success is its heavy investment in research & development to create the products that will be released in a few years' time. This constant pipeline of new products makes CSL a good long-term investment because it itself is investing for the long-term.
In the first half of FY19 CSL increased its research and development expenditure by $48 million, or 14%. If CSL continues to earn the high rates of return on its investments, this $48 million is well spent for future profit growth.
Foolish takeaway
With CSL shares down by nearly 20% since the end of last reporting season it looks more attractively priced, but it's still trading at 31x FY19's estimated earnings. CSL is definitely a more attractive growth share than Commonwealth Bank of Australia (ASX: CBA) or Telstra Corporation Ltd (ASX: TLS), but I think it's too expensive for the current growth rate to consider buying today.
