Why 'significant upside remains' for CSL shares

Bell Potter thinks very highly of this world-class stock.

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CSL Ltd (ASX: CSL) shares could be one of the best options out there for investors right now.

That's the view of analysts at Bell Potter, which have named the biotechnology company on their Australian equities panel this month.

What is an equities panel? It is essentially the broker's best ideas list filled with companies that offer compelling risk/rewards. Bell Potter describes its panel as follows:

Our panel of favoured Australian equities offer attractive risk-adjusted returns over the long term. We consider the current macro-economic backdrop and investment environment, focusing on quality companies with proven track records, strong management teams and competitive advantages.

Why are CSL shares best buys?

Bell Potter highlights that CSL has been a real success story over the past two and a half decades thanks to its ability to generate high returns on capital. It said:

CSL is one of the world's largest global plasma fractionators. The plasma products themselves have proven excellent medical products, with wide application, and deliver therapeutic outcomes difficult to achieve by other means. The company has a proven track record of deploying capital effectively and generating high returns over the past 25 years.

Bell Potter thinks this trend can continue. Particularly given its belief that CSL is entering a margin recovery phase, which it expects to underpin stronger than average earnings growth in the coming years.

And with CSL's shares trading on lower than average multiples, it feels that now could be the time to pounce. The broker explains:

CSL presents an attractive buying opportunity as we anticipate the start of a margin recovery phase for CSL, driving above-market earnings growth over the next few years. CSL trades at a 12-month forward PE of ~28x, representing a discount to its 10-year average of ~31x. Furthermore, the company will continue to deleverage the balance sheet over the next few years. Given the company's proven quality and growth prospects, we believe significant upside remains.

Who else is bullish?

It isn't just Bell Potter that thinks highly of CSL shares. There are a good number of brokers out there that are recommending the company as a buy.

For example, Citi currently has a buy rating and $345.00 price target, Morgans has an add rating and $330.75 price target, and Macquarie has an outperform rating and $330.00 price target, to name just three.

It is also worth noting that Macquarie is so bullish that it believes the CSL share price could rise beyond $500 in the next three years.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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