The CSL share price just hit a multi-year low, is it time to buy?

The healthcare giant is suffering a loss of investor confidence.

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The CSL Limited (ASX: CSL) share price has dropped more than 20% in the last four months. The ASX healthcare share giant is now down around 30% from its pre-COVID high. It's at a multi-year low.

It's lower today than it was during the worst of the COVID-19 crash in March 2020.

CSL is often seen as one of the highest-quality healthcare businesses in Australia, yet it's experiencing a sell-off.

What's happening with the CSL share price?

The company recently held its annual general meeting (AGM) and it wasn't great news. For example, in CSL Behring, the business is seeing a lower profit margin. Dr Paul McKenzie, the CSL CEO said:

We expect CSL Behring gross margin to return to pre-COVID levels in the medium term. The path to margin recovery however is different to the COVID driven margin decline. The largest contributor to gross margin improvement, [is a] reduction in our cost per litre. The biggest components within cost per litre are donor compensation and direct labour. Cost per litre is around 17% off the peak, so we are making genuine inroads, but there is more to do and it's just going to take some time.

There was also a suggestion that new products and improving yields could help the profit margin.

One of the most important things that investors like to judge a business on is the profit it makes.

CSL has guided that for FY24 it's expecting revenue to grow approximately 9% to 11% at constant currency (meaning the same exchange rates).

The business is projecting that underlying net profit after tax (NPATA) will be between $2.9 billion to $3 billion at constant currency, which would be growth of between 13% to 17%, though the growth rate excludes the one-off gain it made from the sale of property in FY23 of $44 million.

There is also a lot of commentary about the potential for the drug Ozempic to have a positive effect on people with kidney disease and related illnesses. CSL is exposed to this through its Vifor acquisition. As my colleague James Mickleboro reported, investment bank Goldman Sachs recently said:

There is a direct link to CSL through the Vifor segment (potentially a direct earnings impact for a company which sells drugs to the kidney disease/dialysis populations, but also potential consequences for the carrying value of the business itself, which is comprised almost entirely of intangible assets and goodwill).

Time to buy?

Warren Buffett once said that investors should be greedy when investors are fearful and fearful when investors are greedy.

Investors may be overreacting by sending the CSL share price as low as it has gone. There are many products in the CSL portfolio, not just Vifor ones, but it'd be a disappointing use of capital if it turns out that Vifor's potential is not as great as first thought. Though, it's possible that Vifor could do better than the pessimists are thinking.

According to analyst ratings collated by Factset, there are 16 buy ratings on CSL, two hold ratings and one sell rating. That's a very bullish group of analysts.

However, another of Warren Buffett's pieces of investment advice is to stay within your circle of competence. In other words, only invest in what you understand.

ASX biotechnology shares, even as one as big as CSL, isn't an area I can claim to have much expertise about, which is why I'm not a shareholder and I don't often say it's worth looking at. To me, there's always a chance in that industry that a competitor could invent a better treatment, and I wouldn't know how to judge the likelihood of that.

The CSL share price may be an opportunity, but it's not the first thing I'd invest in with $10,000.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Goldman Sachs Group. The Motley Fool Australia has recommended CSL. 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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