CSL Limited (ASX: CSL) shares have long been a portfolio staple for growth investors (and a lot of others). CSL has been one of the best performing shares over the last 10 years, with the CSL share price rising from $32 in July 2009 to the $224.36 price they are trading for at the time of writing. This roughly equals a 600% gain over 10 years (not including dividends), which is a very solid return indeed. CSL shares are already up 21% in 2019 so far, so this stellar record looks to be continuing full-steam ahead.
So are CSL shares a buy today? Or, like all good things, have CSL’s gains come to an end?
What does CSL do?
CSL has an interesting history, as it was a government-owned company for most of its life (CSL stands for Commonwealth Serum Laboratories). It started life in 1918 as a government body responsible for manufacturing vaccines and later expanded into anti-venoms for snake bites. Its other achievements since its founding include a major role in the eradication of polio in Australia with its vaccine during the 1950s and ’60s, as well as pioneering research into HIV transmission in the 1980s.
In 1994, CSL was privatised and listed on the ASX for $2.30 per share (read it and weep). Since that time, it has continued to dominate the Australian medical scene – in 2009, the Australian government ordered 21 million vaccines from CSL to combat the swine flu epidemic.
Today, CSL has two primary divisions: vaccinations and blood plasma products. The company also continues to focus on anti-venoms, immunology and other medical research in various fields. CSL’s plasma division is world-renowned and continues to lead in its field and there is little doubt that if there is another flu scare, CSL’s vaccine division will be hastily called upon to offer its services again. I would like to think that these two divisions alone are enough to grant CSL a wide economic ‘moat’ and ensure the viability of the business for decades to come.
So is CSL a buy?
Its all very well to say that CSL has business moat, but the numbers also quantitatively back this up: CSL’s revenues grew by a hefty 12% last year and the company has increased earnings-per-share by almost 10% per annum over the past three years. Saying this, the market is very familiar with CSL’s performance by now and accordingly prices the stock at a premium (with a current price-to-earnings ratio of 41.3).
Although CSL is expensive by traditional measures, the shares also seemed expensive by the same measures five years ago when CSL was going for $68 a share. If you had held off then, you would be regretting it today. I personally would wait for a price correction to open a position, but I believe CSL will be a real winner for the next decade and beyond.
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Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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.