CSL is in a unique position to consistently grow its top and bottom line while maintaining its margins and high ROE. Its able to focus on the long game and take the short term hits like the transition to the new distribution model in China. At the risk of stating the obvious, CSL’s half year results would have been even better had it not been for this. As you said, they are prepared to spend 10% of their sales on R&D and make the capital outlays on plasma collection centres to drive further growth. Other companies whose margins are constantly being squeezed have to focus on cutting costs just to tread water with their bottom line or worse, shift goal posts… emphasize the boost in subscriber numbers, fewer customer dissatisfaction, fewer drop out rates, and hope that this translates to their bottom line.
I think if CSL had continued with its buy back program CSL could have reached negative equity. Very few companies who are not part of the corporate walking dead are able to achieve this. Only companies like Philip Morris and Moody’s Corporation are in this elite group. I think CSL could have attained this.
These and your points emphasize the strengths of CSL’s underlying business and justify its market darling status.
As a side note, in recent days I have read reports on the use of plasma from recovered coronavirus patients as a means of treating those infected with the virus.
The treatment is only in its early stages and will need to undergo further testing but its possible for CSL to lead the way here. This is obviously conjecture on my behalf but I don’t think CSL would make any money from it, at least initially nor should it (as CSL previously stated, "...investigated possible adjacencies in expertise, technologies and facilities that might be able to contribute to the global effort....." on humanitarian grounds) but its interesting to think of it as other revenue possibilities for CSL.
Cheers,
Porkchop
CSL Price at posting:
$332.55 Sentiment: Hold Disclosure: Held
(20min delay)