The CSL Ltd (ASX: CSL) share price is edging lower on Thursday.
In morning trade, the biotechnology giant's shares are down slightly to $269.76.
This means that its shares are now down 14% from its 52-week high and within touching distance of a 52-week low.
Does this make it a buy? Let's see what analysts are saying about the company.
Is the CSL share price undervalued?
While there are concerns over what impact Donald Trump could have on the healthcare sector in the United States, a large number of brokers believe the risk/reward on offer with CSL's shares is very favourable.
One of those brokers is Goldman Sachs, which has just initiated coverage on the CSL Behring owner with a buy rating and $325.40 price target. Based on the current CSL share price of $269.76, this implies potential upside of 20% for investors over the next 12 months.
What is it saying about CSL?
Goldman acknowledges that the last five years have been challenging for the company. So much so, this normally reliable investment is down 17% over the period.
However, the broker believes that the worst is now behind the company and that the next few years will look very different. It said:
The last five years have been particularly challenging for CSL, with the business navigating material inflationary pressures to its plasma collections costs, the threat of a new entrant (anti-FcRn) in its core Immunoglobulin (IG) market, its Vifor acquisition encountering the entry of generics quicker than anticipated and late-stage R&D setbacks.
Whilst some of these developments have led to structural changes to CSL's business, we believe the company's proactive investments in its IG franchise and new product launches in the Behring portfolio are set to increase ROIC in this new operating environment.
The broker is forecasting double digit IG growth through to FY 2028, a strong gross margin recovery, and a rebound in Seqirus growth from depressed US influenza vaccination rates.
Looking cheap
In light of the above, Goldman Sachs believes that CSL's shares are cheap at current levels and deserve a re-rating. It explains:
Our 25.6x Forward 12 months EV/EBIT multiple for CSL is based on the stock's history relative to the index (ASX200) and relative to its peers, normalising for differences in growth. Over the last 10 years, CSL's premium to the ASX 200 has ranged from 1.5x-3.0x.
We adopt a premium of 1.8x as part of our valuation which is close to the 10-year average noting the current share price values the business cheaper relative to its 5 and 10-year averages. We believe ongoing momentum in CSL's IG revenue growth, Gross Margin recovery and execution on market share initiatives in Hemophilia and HAE are key drivers in driving re-rating.
Elsewhere, Ord Minnett put a buy rating and $318.00 price target on its shares this week, Citi put a buy rating and $345.00 price target on them last week, and UBS put a buy rating and $330.00 price target on them last month. All these price targets offer upside of approximately 18%+ for the CSL share price.
