An ASX 200 market darling in the past, but don’t expect fireworks from the CSL share price going forward

1) The CSL Limited (ASX: CSL) share price fell around 4% in Wednesday trade to $285. This comes after the popular biotech reported a 6% fall in FY22 net profit on revenue growth of just 3%.

For a company trading on a trailing price-to-earnings (P/E) ratio of around 40 times, the growth is underwhelming, to say the least. 

Admittedly, the past year has not been an easy one, with CSL Chief Executive Paul Perreault saying…

“CSL has delivered a good result at the top end of our guidance, demonstrating our resilient performance against the ongoing challenges presented by the global COVID pandemic.”

CSL is anticipating a return to growth in FY23, forecasting an uplift in profits of around 8%. 

Once the darling of the ASX, the CSL share price first hit these levels coming up to three years ago now, lagging the returns of the ASX 200.

Given its competitive advantage, CSL might be seen as a safe investment, but trading on 40 times earnings, going forward it’s unlikely to deliver anything like the bumper returns from years gone by.

2) With the ASX 200 up around 10% from its June lows, it feels like the easy “rebound” gains have already been made.

Results season has largely been “as expected” for many of the large-cap stocks that have so far reported. 

Resource and commodity companies: booming profits and dividends in FY22, but expecting lower commodity prices and higher costs in FY23. BHP Limited (ASX: BHP) has been the standout, with the BHP share price now trading on a fully franked dividend yield of around 11%. Just don’t bank on that same yield going forward. 

Tech stocks: still posting losses, but with a keen eye on breakeven. Many share prices have made a partial recovery, albeit from falls of up to 80% or more, as tax loss selling hit them for six. 

Reporting today, SaaS stock Whisper (ASX: WSP) said it’s “on track for positive EBITDA in FY23 as it reported an FY22 EBITDA loss of $10.6 million. The Whispir share price is up 67% from its June lows, but down 75% from its July 2020 highs. I own the stock, for my sins.

Bank stocks: a decent FY22, but a more challenging FY23. After holding up reasonably well during the “inflation correction”, the CBA share price now looks downright expensive, and only trades on a fully franked dividend yield of 3.9%.  

3) So, where to from here?

I’m pinning my short-term hopes on a few ASX microcap stocks I own, many of which have (sadly, for me) not participated in the stock market recovery of the past two months.

One is MSL Solutions (ASX: MSL), a leading SaaS technology provider to the sports, leisure, and hospitality sectors. Its share price is showing signs of life on Wednesday — up 10% on modest volume — but is still trading lower than when it updated the market on May 31 with a strong forecast for FY22.

MSL Solutions reports tomorrow. It has forecast revenue growth of around 30% and trades on a forecast EBITDA multiple of around 12 times. MSL shares are not exactly cheap, but with a decent level of predictable revenue, I think the company should be able to keep growing nicely into the future.

The post An ASX 200 market darling in the past, but don’t expect fireworks from the CSL share price going forward appeared first on The Motley Fool Australia.

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More reading

• CSL share price drops despite expectations of growth in FY23
• CSL share price on watch following FY22 results
• Brokers say BHP and this ASX 200 share are buys
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Bruce Jackson has positions in MSL Solutions Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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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