The share price of CSL Limited (ASX: CSL) rose this month after stellar full-year outcomes to an all-time high of $242.10, but did the biotech behemoth reach a share price ceiling?
Background on CSL
CSL has outperformed the S&P/ASX 200 (INDEXASX: XJO) by 4.6% year-to-date, gaining 24.6%. Looking at its performance across the past 5 years, the CSL share price has gained 165% since the start of 2015.
The CSL market capitalization now stands at a staggering $105 billion, with net assets as at full-year 2019 at $5.251 million. It’s market capitalization is almost eight times the size of its closest competitors for ASX biotech and healthcare–Sonic Healthcare Limited (ASX: SHL), Ramsay Health Limited (ASX: RHC) and Cochlear Limited (ASX: COH).
The findings were extremely positive, meeting the expectations of CSL’s already substantial guidance.
Since the FY15, the NPAT of CSL has grown by 46.1% and its complete working income has increased by 56%.
Overweight or overrated?
CSL’s price-to-earnings ratio (P / E) is slightly greater than Sonic’s (22.6) and Ramsay’s (24.6) likes. However, the P / E of CSL is smaller than ResMed Inc (ASX: RMD) (48.1) and Cochlear (44.1) industry competitors.
Can CSL’s growth continue?
Strong product sales
By specializing in rare and severe disease therapies, CSL’s Behring arm accounts for 85% of its income. This knowledge distinguishes the primary products of CSL and acts against competitors as a moat.
In addition, CSL’s recently purchased subsidiary Seqirus revealed last October that its influenza vaccine was 36 percent more efficient in stopping influenza-related diseases during the 2017/18 influenza season than conventional vaccines.
A boom in biotech sector and rising healthcare spending
The World Health Organization revealed that spending on healthcare accounted for 10 percent of global GDP and that spending on global healthcare is increasing by 5 percent annually.
Forecasts and estimates
Looking forward, CSL CEO Paul Perreault revealed that “CSL’s net after-tax profit for FY20 is expected to be in steady currency range from roughly $2.050 million to $2.110 million, representing the development of roughly 7–10 percent over FY19.”
CSL is mainly isolated from trade war shocks and economic cycles, making it an attractive alternative to stocks that can shake off the headwinds of the US-China trade war and a dull economic outlook. Life-saving biotechnology demand is more elastic than discretionary product demand.