Why the CSL share price rose 10% in November

Here's why the CSL Ltd (ASX: CSL) share price rose 10% in November

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shareholders of CSL Limited (ASX: CSL) should be used to a solid monthly gain by now. After all, CSL shares are up 55% YTD, and 233% over the past 5 years.

But as CSL shares started November asking around $258.65 and ended the month with a $286.10 price tag, shareholders can bank another 10.6% gain to add to their collection.

Why did CSL shares race ahead last month?

Momentum in the ASX's third largest stock has been building ever since the healthcare giant released its FY19 results in August, in which it reported revenue growth of 11% and profit growth of 17%.

For such a large company, these numbers are very encouraging and demonstrate that CSL's management remain at the top of their game.

Being in the healthcare sector, CSL can also enjoy all of the benefits that come with it – such as government support, a non-cyclical earnings base and the ever-present 'ageing population' tailwind. Investors know all this, and combined with CSL's phenomenal growth history, are clearly prepared to assign a high valuation to this company's cash flows.

Of course, CSL's success has also been buoyed by a rising market overall. Low interest rates give a dividend growth stock like CSL even more appeal.

It's no surprise then that brokers are re-rating the stock ever higher. Just this week, analysts from Macquarie Group Ltd (ASX: MQG) kept an 'outperform' rating and slapped a $300 price target on the company.

All of these factors (in my opinion) were behind the CSL outperformance in November.

Is CSL a buy today?

Well, that's the $286 question. On yesterday's closing price, CSL shares are trading at nearly 46 times the company's earnings. Seeing as the current market average is around 19, it's fairly hard to describe CSL as anything but expensive.

But CSL is one of those companies that almost always trades at a premium and yet never seems to fail to rise. So yes, CSL is expensive, but you're also paying for quality, so maybe its worth it.

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 owns shares of and has recommended Macquarie Group 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.

More on Share Market News

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »