Well, it's finally happened. The CSL Limited (ASX: CSL) share price has hit $300 per share for the first time – which is both a new 52-week high and an all-time high. CSL shares opened at $299.94 this morning after closing at $297.26 yesterday, but quickly blew past the $300 per share mark jut after trading started, printing a new high watermark of $300.58.
The CSL share price has since pulled back slightly and is going for $298.95 at the time of writing.
Why are CSL shares at an all-time high?
Well, in large part it has to do with general positive momentum in the overall markets. Accompanying CSL's new high today has been a new high for the S&P/ASX 200 Index (INDEXASX: XJO), which has crossed the 7,000-point threshold for the very first time today as well.
News that US President Donald Trump has signed off on a 'Phase One' trade deal with China has been driving the positivity in the markets today, potentially signalling there is an end in sight to the now years-old trade war.
Nevertheless, this mornings high for CSL caps off a remarkable few years for the company's share price. It was only in December 2018 that CSL shares were going for under $180, which means that today's share price represents close to a 70% gain in just over 12 months.
Anyone who has held CSL shares for the past 5 years would be looking at roughly a 241% gain in that time (not including dividend returns).
Where to next for the CSL share price?
Quite frankly, that's anyone's guess. With a price-to-earnings (P/E) ratio of 48.92 on the current share price, it's starting to become tempting to label the valuation as stretched – to say the least. Remember this is a company that reported revenue growth of 11% last year and profit growth of 17%.
Those are good numbers, don't get me wrong. But do they justify a P/E ratio of close to 50?
The market seems to think so, but I'm not so sure. CSL has benefitted enormously in the last few years by a falling Australian dollar and a tight market for some of its most valuable blood/plasma medicines and products.
If these external tailwinds reverse in the next few years, I estimate it will lead to increasing pressure on CSL's revenue and earnings. And who knows what price the market will be willing to pay for each dollar of CSL's earnings then.
Foolish takeaway
CSL has always been a company that commands a premium price – and for good reason. But today's new highs are not getting me excited about adding this company to my own portfolio (despite how much I would like to).
