At the start of 2024, the prevailing investment case for CSL had three elements:
1.Recovery in Behring gross margins
2. Sign of operating improvement at Vifor
3. Catalyst from announcement of R&D program success
At the full-year result, Points 1 and 2 remained elusive, while yesterday's R&D day (Point 3) also failed to inspire.
This kind of absence of upside surprises in recent years is at odds with CSL's legacy pedigree.
The longer this under-delivery vs expectations continues, the more it dampens that market's appetite to pay the kinds of premium valuation multiples that have historically been afforded CSL.
Five years ago the stock was capitalised at >40x prospective P/E (~$280/share price on FY2020 EPS of $6.80); today the stock is trading on 27.5x prospective P/E ($291/share price on FY2025 forecast EPS of $10.60/share).
Such has been the extent of the de-rating of the multiple, with the consequence of the share price having done virtually nothing for a full five years, which represents a significant opportunity cost given the near 30% return of the overall market over that period.
As can be see in the chart above, the only way one could have come close to matching index returns was to buy the stock whenever it went through one of the three sharp dips that occurred over that time, namely Feb 2021, Feb 2022, and Sep 2023 (denoted by yellow shading).
During those dips, the prospective P/E multiples were, respectively, 32.0x, 34.0x and 25.6x , which - by inference - means that the current multiple of 27.5x represents another good opportunity to buy, either for those with a trading mindset or for lone-term shareholders wishing to enter or increase holdings.
As can be seen, valuation multiples matter.
.
CSL Price at posting:
$291.67 Sentiment: None Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)