The CSL Limited (ASX: CSL) share price is up 2.6% at the moment, is it a buy?
CSL is Australia's largest healthcare business with a market capitalisation of over $81 billion. Over the past five years it has arguably been the best blue chip to own, its share price has risen by 177% as well as a bit of dividend income.
CSL is a Melbourne-based global biotech business that develops and delivers biotherapies and influenza vaccines. CSL Plasma is the largest collector of human blood plasma in the world, sourcing plasma from hundreds of thousands of donors globally to produce a range of life-saving medicines for critically ill patients.
It's an important part of the healthcare industry for keeping patients alive and well. Patients (and governments) will mostly pay what it takes to keep people alive and well. Helpfully for shareholders, people don't get sick according to economic cycle – the demand is consistent.
In-fact, the economy is in a much better place when people aren't sick, so the government has a vested interest in helping CSL succeed.
One of the main things that I like about CSL is its long-term research & development focus. By focusing on the long-term with its products, CSL becomes a long-term investment candidate.
It has increased its total R&D expenditure from US$466 million to US$702 million in FY18, with a large amount of the funds being used on new products. CSL is generally spending around 10% of global revenue on R&D. I'm not a doctor so I couldn't really tell you how successful its products are, even with the supplied presentation slides.
However, I can understand that CSL's products are creating excellent financial results. In FY18 alone it increased revenue by 11% and earnings per share by 29%, with the dividend increasing by 26%.
Foolish takeaway
CSL is currently trading at 31x FY19's estimated earnings. Some value investors think that CSL is trading too expensively, but I much prefer it to other large ASX blue chips like Australia and New Zealand Banking Group (ASX: ANZ) or Telstra Corporation Ltd (ASX: TLS), even at the elevated level. It helps it has fallen in recent months.
CSL is a high-quality company, but I think there are better-priced opportunities on the ASX with similar (or better) growth prospects.
