The CSL Limited (ASX: CSL) share price has risen strongly over the past 12 months. It rose from $211.42 last June to $341.00 in mid-February this year. It then declined sharply in the first month of the coronavirus crisis to mid-March. However, after a strong rally to mid-April, where it regained most of its losses, its share price has been on a downward trajectory again.
CSL is also playing an important role during the pandemic. It has recently entered into a new agreement to accelerate the development of a COVID-19 vaccine candidate.
With all this in mind, is the CSL share price a buy right now?
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An amazing Australian success story
Although the CSL share price has lost some recent ground, its long-term returns to shareholders have been amazing.
It has risen from a split-adjusted price of 76.6 cents back in 1994 to now be trading at $284.10. So if you had invested $10,000 back in 1994, that investment would now be worth a staggering $3.71 million!
CSL has evolved from a modest federal government department back in 1994, to become the largest company on the S&P/ASX 200 Index (ASX: XJO). It now has a market capitalisation of $129 billion.
The company has become a global market leader in blood plasma research and disease treatment, now reaching more than 60 countries.
High investment in research and development to create new products is a key factor underpinning its success.
CSL's P/E ratio is high. Is this a reason not to invest?
CSL's P/E ratio is 44.09. That significantly higher than the ASX market average which is around 18. However, due to CSL's strong market differentiation and strong growth potential, I don't think this is an issue. In addition, over the past 10 years, CSL's P/E ratio has always been above the market average, yet its share price has continued to climb!
A similar trend has been evident over the past decade with other top Australian growth shares. These include: REA Group Limited (ASX: REA), Carsales.Com Ltd (ASX: CAR) and Seek Limited (ASX: SEK).
So, is the CSL share price a buy?
The CSL share price has been trending downwards since April. However, there doesn't appear to be any obvious reason for this trend. In fact, despite no recent announcements, CSL's latest business performance continues to appear quite strong. And, with its share price well below its 12-month peak in February, I think now offers a reasonable buying opportunity for long-term investors.
I believe that CSL remains well-positioned to continue delivering strong earnings growth over the next 5–10 years. It continues to have a strong new product development pipeline. There is also likely to be a steadily increasing global demand for immunoglobulin products over the years to come.
