10/02/2026

CSL is a complex rollup beast. It’s above my pay grade to work out how all the moving parts of the business are going to perform going forward, so I’m going to base my valuation on mid-range of FY26 guidance, work out the ROE based on NAPTA figures, then trust the current transformation program will improve profitability and marginally increase ROE from FY26 onwards.

Firstly, I asked ChatGPT to help me work out an estimated EPS in AUD based on guidance and the increased on-market share buy back assuming an average price of $160 per share. Then I asked it to compare this with current analyst EPS consensus. Here is the response:

“CSL has provided FY2026 NPATA guidance of US$3.45 – 3.55 billion (constant currency, excluding one-offs). The company has also expanded its on-market buyback to A$750 million. This summary presents a scenario using an average buyback price of A$160 per share.

Key Inputs

• NPATA Guidance: US$3.45 – 3.55 b (company guidance)
• FX Rate: AUD/USD = 0.71 → 1 USD = 1.41 AUD
• Shares Outstanding (pre-buyback): 484.2 million
• Buyback: A$750 million total, average price A$160 → 4.69 million shares retired
• Shares Outstanding (post-buyback): 479.5 million

Calculated EPS (AUD)

• Lower NPATA scenario: A$10.15
• Upper NPATA scenario: A$10.44

Estimated FY2026 EPS Range: A$10.15 – A$10.44

Comparison to Analyst Consensus

• Analyst consensus EPS: ~A$10.70
• Difference (~3–5%) due to:
• Analysts assuming earnings closer to top of NPATA range
• FX variations
• Weighted average share count adjustments

Key Considerations

1. Buyback Impact: Fully executed buyback (~4.69 m shares) modestly increases EPS (~1–2%).
2. FX Sensitivity: 1c AUD/USD move → ~1.4% EPS change.
3. Timing: EPS uses weighted average shares; late-year buybacks slightly reduce the uplift.
4. NPATA vs Statutory EPS: Reported statutory EPS may differ due to one-off items and amortisation.

Conclusion

Even under conservative assumptions, the buyback materially supports EPS. The FY26 range (A$10.15 – A$10.44) is slightly below analyst consensus but within a reasonable range given FX and NPATA variability. Buyback execution is a key lever to EPS outcomes.”

My Valuation

In this case I’m going to work out my valuation using McNiven’s Valuation formula. The formula is particularly suited to businesses that have highly predictable growth and ROE. This hasn’t been the case for CSL to date, so we need to assume an ROE for the foreseeable future. What the formula does is it works out how your equity compounds over time given the ROE and the earnings reinvestment percentage. It also adds in your earnings from dividends. The inputs include: the starting equity per share, the percentage return on equity (ROE), how much is reinvested (which compounds equity value and future earnings), and what you require as a minimum annual return (ROI) for this type of business, then uses these inputs to come up with a valuation. Using a spreadsheet you can also start with a valuation and work out what your ROI based on these assumptions. For more info on how the formula works you can find a forum here under McNiven’s Valuation which has a link to the meeting I had with @Strawman

OK, now the inputs. Working on mid-range guidance of A$10.30 per share, equity of A$67.90 per share (book value from CommSec financial data at 30/06/25) I get an ROE of 15.2% for FY26 based on guidance FY26 NAPTA. If I use a valuation of $160 per share (current price) and assume 50% of earnings are reinvested at the same ROE for ever and a day, that gives me an annual return on my investment of 9% per year buying at the current price. I think that’s OK for a business like CSL.

If I now assume the CSL Transformation Strategy actually improves profitability, and ROE continues into the future at 16%, then the valuation lifts to $180 with a 9% return on investment, or $150 with a 10% return on investment. Perhaps profitability might improve and ROE lifts even higher, then $160 starts to look like good value. Out of interest PE is currently 15.5 times FY26 NAPTA guidance. Looks reasonable value on a PE basis.

To get a better idea of valuation I’m going to wait until FY26 results. This will give me a better idea if the transformation strategy is working or not, and some more confidence in where future ROE might be heading. For now I’m going to work with forward ROE of 16% giving me a valuation of $160 with a 9.5% return on my investment. I’m putting my trust in management to deliver on its promises. For now it’s a HOLD at the current price. I won’t be adding or selling at the current share price before the FY26 results and when we should receive some guidance for FY27.

Held IRL and SM