With the S&P/ASX 200 Index (INDEXASX: XJO) down sharply again today, for many readers the concept of buying shares when a lot of investors are panicking can feel like a scary notion. However, fortune favours the brave, as they say – it is in times like these that astute investors can purchase quality companies at more attractive share prices.
One ASX 200 share that comes to mind is CSL Limited (ASX: CSL). With CSL’s share price down by more than 8% over the last week, I believe now could be a great time to purchase shares in this high quality ASX 200 share.
An Australian success story
Over the past two decades, CSL has gone from strength to strength. It has achieved the remarkable feat of evolving from a small federal government department back in the 1990s to now sit as the second-largest company on the ASX. With a market capitalisation of $142.66 billion at the time of writing, it is fast approaching the ASX’s largest listing, Commonwealth Bank of Australia (ASX: CBA).
Today, CSL is a global market leader in blood plasma research and disease treatment, reaching more than 60 countries and employing over 22,000 people.
CSL’s significant investment into research and development creates a continual pipeline of new and innovative products, which provides additional revenue streams and creates an even larger moat to protect against market competition. Equally important, CSL’s proven track record in selecting the right areas to invest is likely to pay off for the company in the future.
Is CSL’s high P/E ratio a reason not to invest?
CSL’s P/E ratio of 47 is significantly above the ASX market average, and is very high for one of Australia’s largest listed companies. That being said, a high P/E ratio can still lead to long-term strong share price growth, as long as the company has strong market differentiation and solid growth potential across its major divisions. I believe that CSL definitely passes both these tests.
In actual fact, if you had stayed away from investing in CSL because of its high P/E ratio over the past 5–10 years, then you would have missed out on a huge market gain. If, for example, you had invested $10,000 in CSL back in 2012, that investment would now be worth a staggering $96,000.
Foolish bottom line
I believe that CSL is well-positioned to continue to deliver strong earnings growth over the next 5 to 10 years, driven by a strong new product development pipeline, and a steadily increasing global demand for immunoglobulin products.
With a recent correction to its share price due to the current market sell-off, I believe now could be a good time to buy shares in this market leader if you are an investor with a long-term investment horizon.
Where to invest $1,000 right now
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Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
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Phil Harpur owns shares of Commonwealth Bank of Australia and CSL Ltd. 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.
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