Like most ASX shares, the CSL Limited (ASX: CSL) share price hasn't been responding well to the market gyrations we have seen over the past week or two.
Shareholders of CSL used to seeing their shares rise almost without interruption were rudely awakened to reality when CSL pulled back from its newest all-time high exactly two weeks ago. That was when CSL was going for $342.75 a share.
Today, CSL is asking just $308.32 (at the time of writing) – a 10% turnaround.
That's actually less than what the broader S&P/ASX 200 Index (INDEXASX: XJO) index has delivered in losses, so in a way, CSL has 'outperformed the market' even in these darker times.
It is worth noting though that CSL (as a healthcare and vaccine provider) is better placed than most companies to cope with disruptions from the coronavirus.
But are CSL shares in the buy zone at these levels? After all, this is the biggest pullback in the CSL share price since December 2018…
Are CSL shares in the buy zone?
At CSL's new share price, the market is currently assigning it a price-to-earnings (P/E) ratio of 45.36. In other words, investors are willing to pay $45.36 for each dollar of earnings the company produces.
Right now, the ASX 200 average is $18.03 per dollar of earnings.
So investors must ask themselves – is this premium worth it?
Well, there's a lot to like about CSL. It's one of those rare companies that exhibit both growth and defensive qualities – which are highly desirous in a stock.
CSL's growth has been healthy too – last year CSL reported annual revenue growth of 11% to US$8.54 billion and profit growth of 17% to US$1.92 billion.
But bear in mind that there have been recent supply issues with the immunoglobulin market as well as a falling Australian dollar – tailwinds that are not likely to be permanent for CSL.
So for me, I'm not sure CSL shares are in the buy zone just yet.
Foolish takeaway
You could make a good case for 'fair value' at the current share price, but I certainly don't think a bargain is in our sights just yet.
For me personally, I would look at CSL shares if they had a P/E ratio under 30. That would imply a share price of just over $200 on CSL's trailing earnings per share – still a ways away from the current price tag.
Unfortunately, it looks as though I'll be on the sidelines for some time yet!
