Should I Buy CSL Shares 2021 Highlights
CSL Shares Price Today
In November of 2020, CSL reached its all-time high with a share price of 320.42. The CSL share price did not respond to the COVID crash and continued higher as the rest of the market fell. Today the share price is 305.52. This is at the upper quartile of its 52-week range of 242-320.42.
Over the past ten years, CSL is up over 810%. During this time it’s returned a breathtaking 91.09% each year. That’s 85.5% attributed to capital gains and 5.6% to its dividend return over this period. This has far outperformed the market’s total return of 64% over the same period.
About CSL Shares
CSL operates in three core areas;
CSL Behring (Plasma): This area is the largest revenue driver for the company. They are responsible for the collection and refinement of blood and blood plasma products (namely immunoglobulin and albumin). CSL Plasma is the largest collector of human blood plasma in the world. They produce a range of life-saving medicines for critically ill patients. From burns treatments to transfusions
Seqirus: Seqirus is one of the largest influenza vaccine companies in the world they manufacture and distribute of influenza vaccines annually.
CSL Behring: The final segment makes up a small portion of CSL’s business. CSL Behring also develops different treatments and drugs for rare diseases, and many Australian anti-venoms.
These three core strategies have an excellent synergy that makes CSL an excellent business.
Privatization of CSL Shares
In 1994, the Commonwealth facility was privatized as CSL Ltd. and was publicly listed and traded on the ASX. The company completed its IPO in June 1994 at just $2.30 per share.
Dividend History
CSL typically announces a dividend with the release of its half-yearly results in February and full-year results in August as seen in their financial calendar. Dividends are typically paid twice a year, in March (interim dividend) and September (final dividend).
CSL has paid biannual dividends every year since 2009. CSL does not pay a franked dividend. The current average yearly dividend for CSL shares is $2.887 giving them a yield of 0.92% at the current share price.
Fundamental Summary
In terms of fundamentals, CSL shares are relatively overvalued. Their PE multiple of 38.22 is far above the market average of 15-20x. Of course, this could be interpreted as high investor sentiments for the growth of CSL. Here’s how to interpret PE
Their PEG also reflects poor value. The company also has a very low book value of just $17.13 compared to its share price of $305.
To support their valuation the company does have an amazing ROE of 27% compared to the market average of only 12.9%. CSL has continuously delivered results and as such has developed a relatively high earnings multiple.
Technicals
The general consensus within the Technical Analysis community is currently Bullish on CSL shares. The moving averages and Technical Indicators seem to indicate a Strong Buy.
In summary, the upside is likely to prevail as long as $293 is supported. The alternative scenario is that a downside breakout of $293 would call for $286 and $283.
Insider Ownership and Trading
CSL has insider ownership of 0.1%. Meanwhile, general investors own the majority 71.7%, and institutions own 28%, and the remaining 0.2% are owned by private companies.
The lack of insider ownership may seem like a red flag, however, it is important to recognize that CSL is an ex-government-owned business that has been privatized. We see that all privatized companies have the same proportion of ownerships as CSL, this includes CBA, TLS, TAH, QAN, SYD, SUN. Here’s a report by the RBA if you’re interested in privatization.
There has been some minor insider buying activity in 2021. Around $230 million in shares have been purchased by insiders in the past six months.
COVID Vaccine
CSL is contracted to locally produce AstraZeneca COVID vaccines. With the company hoping to produce 50 million doses by the end of the year. CSL is capable of producing 1 million doses per week. With hopes of increasing productivity
The Funded Deed with the Australian Government and CSL to manufacture AZD1222 vaccine is worth an undisclosed sum but estimated at around $1 billion.
It’s difficult to estimate how much CSL will profit from their COVID-19 partnership. Although Seqirus their Influenza vaccine subsidy has profited substantially, with sales up 38 percent to $US1.4 billion amid global demand for influenza vaccines in the face of the COVID-19 pandemic.
CSL Competitive Advantage
CSL operates in the healthcare sector. Their vaccine and therapies are essential to healthcare and are immune to recessionary periods which was illustrated in 2008 and again during the COVID recession.
Their strong balance sheet allows for the manufacture of new products and extensive R&D. From which they have the ability to generate positive operating cash flows and net profit. They don’t depend on investor’s capital.
They are an essential business to the Australian economy and general population. They are essential to the future of the country and will continue to be supported by the government
Should I Buy CSL Shares: Prophet’s take
CSL is a resilient business essential to the health of the Australian and larger global communities. They have shown the ability to withstand several recessionary periods and have made impressive long-term gains for shareholders.
The synergies of their business have allowed CSL to be a massive global healthcare player. This has also allowed the business to grow rapidly and respond quickly to the COVID pandemic, all while utilizing its strong balance sheet without the need for investor capital.
The current technical factors indicate a strong buy, and given the excellent business model, a premium is to be expected on CSL fundamentals. We are currently BULLISH on CSL shares.
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