CSL Ltd (ASX: CSL) shares have recovered strongly from their $90 low, but at around $138.44 they remain well below the levels investors were used to seeing not that long ago.
The business is also working through one of the more difficult periods in its recent history.
So, after the rebound, are CSL shares still dirt cheap?
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The valuation certainly looks cheap
According to CommSec, consensus earnings per share estimates currently stand at $8.17 in FY26 and $8.31 in FY27.
At the current share price, that puts CSL on a price-to-earnings multiple of around 17 times forecast earnings in both years.
For a company of CSL's calibre, that catches my attention. A few years ago, investors were accustomed to paying much higher multiples for the healthcare giant.
The comparison with the wider biotechnology sector is also interesting. Current industry data puts the median forward earnings multiple at roughly 22.5 times earnings, while some faster-growing global pharmaceutical companies trade considerably higher. Eli Lilly (NYSE: LLY), for example, is currently valued at close to 30 times forward earnings.
That makes CSL's current multiple look unusually low by both historical and sector standards.
There is a reason for the discount
I think CSL deserves to trade at a discount while investors wait for clearer evidence that the business is recovering.
Management downgraded its FY26 outlook in May after several parts of the business fell short of expectations. US immunoglobulin demand remained healthy, but channel inventory changes weighed on revenue. Albumin pricing in China was also weaker, while CSL flagged further problems across Vifor and other parts of the portfolio.
The company also expects substantial additional impairments across FY26 and FY27, much of them connected with CSL Vifor.
There is leadership uncertainty as well, with the search for a permanent chief executive still underway.
Investors therefore have several questions heading into the FY26 result on 18 August. I will be looking closely at the outlook for FY27, progress in CSL Behring, and whether management can begin rebuilding confidence after a difficult year.
Why I still like the risk-reward
The valuation becomes much more interesting to me when I consider what CSL still owns.
Its immunoglobulin franchise remains a global leader, and management estimates that only around 35% of patients across several important indications have been diagnosed. Demand is still expected to grow at a mid-to-high-single-digit rate, supported by substantial unmet medical need.
CSL also retains major strengths in plasma collection and influenza vaccines, while management is simplifying the organisation and working to improve manufacturing efficiency.
I think the market is currently pricing in plenty of uncertainty around how quickly those strengths can translate back into earnings growth.
That uncertainty is justified. At a PE ratio of around 17 times forecast earnings, though, I believe investors are being compensated for taking it.
Foolish takeaway
I think CSL shares are cheap at around $138.44.
The company still needs to prove that earnings can recover, and I would expect the shares to trade at a discount until there is clearer evidence of that.
But CSL remains a high-quality global healthcare business with strong competitive positions and attractive long-term markets.
At the current valuation, I think the risk-reward is compelling enough to make CSL shares a buy.
