The CSL Limited (ASX: CSL) share price has continued its miraculous run into 2020. Shares in the biotherapeutic company have surged more than 78% in the past 12 months and don't look like stopping anytime soon.
So, just how high can the CSL share price go?
What is driving the CSL share price?
Last week, CSL delivered a strong half-year report for FY20 which reflected the company's stellar run over the past 12 months. The report was highlighted by an 11% increase in net profit after tax on a constant currency basis.
The result was driven by strong demand for the company's immunoglobulin (IG) products. CSL's flagship therapies Privigen and Hizentra saw strong sales growth for the first half, reporting growth of 28% and 37% respectively.
In addition, CSL also reported a 16% increase in sales of influenza vaccines and announced plans to open 40 new plasma collection centres. CSL also raised its interim dividend by 18% to $1.42 per share.
Positioned for more growth
Global demand for IG will continue to exceed supply and as a result, CSL will continue to invest in the growth of plasma collection centres.
In order to supplement the revenue from IG sales, CSL continues to reinvest a double-digit percentage of revenue into research and development. This arms the company with a pipeline of additional products and services to compliment future earnings growth. On the short-term horizon, CSL has numerous products pending phase 3 trial outcomes that could supplement future earnings.
Despite the CSL share price looking expensive and trading at ridiculously high PE multiples, the company is poised to deliver more earnings and dividend growth in the future. This is because CSL continues to release earning upgrades which are supported by continuous improvement in fundamentals.
Analysts cautious
Recent broker coverage paints a more subdued outlook for CSL. Despite record growth in sales of the company's IG blood products, some analysts expect growth to moderate over the second half of the financial year.
Analysts still think that IG growth will top annual growth of 20%. However, they also queried whether CSL's current valuation factored in a moderation in short-term growth.
Should you buy?
Personally, I don't advocate for buying shares in a company that has had a stellar run as I am always cautious of buying the 'top'.
The CSL share price has burst through the $300 barrier and is well-positioned to become the most valuable company listed on the ASX. Why I advocate caution is that if there is a pullback in the overall market, many CSL investors will be looking to cash in on their investment and take a profit.
Therefore, although CSL is a quality company, I would wait for a pullback in the company's share price before making a long-term investment.
