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Is the CSL share price currently overvalued?

We examine the current analyst outlook on the biotech giant in the wake of its interim results.

Is the CSL share price fairly valued? Source: Bloomberg

In regard to the central question: the current average analyst price target may indeed suggest that CSL has run ahead of its fair value, if only by a little. According to Bloomberg Data, the average 12-month price target on CSL currently sits at $314.06 per share – roughly 5.7% lower than the biotech giant’s current share price.

Moreover, the stock, now with a market capitalisation of $150 billion, has see its share price rise an incredible ~76% in the last 12-months.

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This is not to say that analysts don’t favour the stock – or that analysts won’t upgrade their price target on the CSL; after all, they spent much of CY19 doing just that – only that at current price levels, the stock may have run ahead of itself.

Indeed, a more granular breakdown of the analyst view shows that CSL has 8 buy ratings, against 6 hold ratings and just 2 sell ratings.

Moreover, this is also not to suggest that CSL is not an excellently run company. As part of the company’s interim results last week the biotech reported an increased interim dividend, stronger H1 earnings and even upgraded its full-year earnings guidance.

'Our results reflect the focused execution of our strategy, robust demand for our differentiated medicines and a deep, inherent passion for meeting the evolving needs of our patients,’ said the company’s Chief Executive, Paul Perreault.

CSL share price: Macquarie & UBS views

Analysts also remain clued in on the strength of CSL, with Macquarie analysts noting that:

'We continue to see CSL's plasma collection centre network as a competitive advantage relative to peers, supporting our expectations for above-industry Ig growth over the balance of FY20 and FY21.'

Competitive advantages however need be tempered against valuations, with Macquarie pointing out that much of the company’s growth is already factored into the current share price.

In step with that, Macquarie downgraded the biotech to ‘neutral’ from ‘outperform’ last week, and assigned CSL a 12-month price target of $324 per share.

UBS, while far more bullish than Macquarie, pointed out that even when considering the favourable earnings upgrade as part of the company’s H1 results, CSL trades at a significant premium to the market. According to UBS, CSL is now trading at a ~47x FY20e earnings (on a diluted basis).

The ASX 200, by comparison, trades at ~19x FY20 earnings, according to Bloomberg Data.

Nonetheless, UBS has a 12-month price target of $365 per share on CSL.

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