CSL shares can 'absolutely' head to $500: ASX expert

This expert reckons it's foolish to bet against CSL…

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There was a time when buying CSL Ltd (ASX: CSL) shares meant buying into a healthcare company that always seemed to be rising in value.

To illustrate, CSL shares first hit $100 each back in 2015. By 2018, they were at $200 and by early 2020, they'd hit $300.

But ever since the pandemic took hold in March 2020, the CSL share price has been stuck in the mud. Today, this ASX 200 healthcare stock is trading at just under $289 a share, the same price the company was asking four Junes ago.

Put another way, since early 2020, there has only been CSl's rather miserly 1.13% dividend yield (at today's pricing anyway) to keep investors company as they waited in vain for some capital growth.

Back in October last year, CSL even got back down to below $230 a share (albeit briefly). Check this all out for yourself below:

But perhaps investors won't have to wait too much longer to see CSL break out of its four-year funk. That's the view of one ASX expert, anyway.

ASX expert says $500 CSL shares are "absolutely" possible

As reported in the Australian Financial Review (AFR) last week, Roy Hunter, portfolio manager of the SG Hiscock Medical Technology Fund, is exceptionally bullish on CSL. When asked if CSL could get to $500 a share in the next few years, Hunter responded, "Absolutely".

Here's some more of what Hunter had to say on this ASX 200 healthcare giant's shares:

…I think it's a fool's errand to bet against the ongoing success of a company like CSL. Its core plasma business looks set to deliver strong growth and margin expansion over the next few years.

However, the FY24 result will be an important determinant of whether the share price hits $500 within a three-year time frame.

The pressure that CSL shares have been under over recent years has arguably stemmed from its previously sky-high earnings multiple, and the growth rates that ASX investors anticipate the ~$140 billion company will be able to maintain going forward.

To illustrate, despite CSL's share price stagnation over the past four years, the company still trades on a lofty price-to-earnings (P/E) ratio of 37.6 today.

Hunter addressed these concerns as well:

The market is getting somewhat impatient and questions will start to be asked about whether the company has entered a phase of structurally lower growth, in which case you will see some valuation headwinds.

The stock needs to see valuation multiple expansion to reach this target, and it will only be rewarded by the market if you see an acceleration of growth and margin expansion.

So, reading between the lines here, Hunter seems to be arguing that CSL shares could indeed hit $500 over the next few years. But to do so, a lot has to go right for the company.

Let's see what happens after CSL's next earnings report, which is due later this winter on 13 August.

Motley Fool contributor Sebastian Bowen has positions in CSL. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. 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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