Is the CSL share price a buy?

Is the CSL Limited (ASX:CSL) share price a buy?

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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.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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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