Now could be the time to snap up CSL Limited (ASX: CSL) shares.
That's the view of analysts at Goldman Sachs, which believe that now is a "compelling entry point after [a] multiple de-rate."
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Why are CSL shares a buy?
Goldman has been looking at the biotherapeutics giant's outlook and believes it is entering a capital-efficient growth period. In light of this, the broker is forecasting major improvements in its returns between now and FY 2027. It said:
CSL is now entering a period of more capital-efficient growth, driving a sharp improvement in our ROIC forecast (+460bps by FY27E). This positive inflection also coincides with a period of historically-high earnings growth (+14% CAGR FY23-27E), which serves to amplify those incremental returns to shareholders.
Goldman also highlights that despite the above, CSL shares are trading at a significant discount to historical levels. Though, it suspects that if its predictions come true, this discount won't last long. It adds:
Although CSL's valuation has historically correlated closely with our measure of forward returns, this relationship broke down through FY22-23 as the NTM P/E multiple de-rated more quickly than expected (from c.46x in Jun-21 to c.23x in Oct-23). However, the forward profile is now materially stronger, and we expect reported improvements in margins/returns through the upcoming periods to once again drive a re-rating in the shares.
Major upside potential
According to the note, the broker has upgraded CSL's shares to a buy rating with a $309.00 price target.
Based on its current share price, this implies a potential upside of 22% for investors over the next 12 months.
All in all, Goldman appears to believe this could be a great time for investors to snap up the shares of one of Australia's highest-quality companies.
