CSL Limited (ASX: CSL) has been one of the best and most consistent stocks to hold over the last 10 years. The stock price has risen by over 750% in 10 years and lost only a relatively small percentage of its value during the GFC.
When looking at CSL's 10-year chart it's interesting to note that the company's share price didn't go anywhere between late 2008 and late 2011. This coincided with a period of time where earnings per share rose impressively from 126 cents in 2008 to 173 cents in 2011.
$30,000 Return
Investors who recognised that buying CSL Limited at a price-to-earnings ratio of 16 represented a bargain would have reaped a return of $30,000 on every $20,000 invested back in 2011. For comparison, the ASX 200 is up just 34% in that time.
Between 2011 and now, earnings per share have risen from 173 cents to 286 cents and the share price has subsequently increased from $27 to $70!
Another $30,000
The question remains, can investors expect similar returns over the next three years?
I am doubtful that the CSL share price will rise to $175 over the next three years, but I believe it will hit $100 soon. Analysts are a little mixed on their forecasts, but based on historical performance and a strong pipeline of new products to boost revenue over the next two years, investors should expect low double-digit earnings growth going forward.
Assuming earnings hit around 350 cents per share by the 2016 financial year, CSL is currently trading on a (far) forward price to earnings ratio of around 20. This is around average for CSL but I expect the company will continue to trade at a premium to the market based on its global dominance, strong pipeline of products, and exceptional management team.
Disappointing Dividends
The only disappointing aspect of CSL as an investment is the company's dividend yield. At only 2%, not franked, and unlikely to rise meaningfully in the future, investors looking for yield should look elsewhere.
