The CSL Limited (ASX: CSL) share price edged 0.17% lower yesterday to close at $287.51 per share. The Aussie biotech’s shares have climbed as high as $342.75 in 2020 before slumping in late May.
Here are a few reasons why I think CSL could be a strong buy at its current price.
Why the CSL share price could be a strong buy
CSL is amongst the largest ASX 200 shares on the market with a $130.54 billion market cap. I think the CSL share price could be a buy, given large caps have tended to outperform small caps in past market downturns.
The company is a leading healthcare player, which should help support CSL’s valuation in 2020. The Aussie company has a strong presence in both rare and serious diseases and influenza vaccines and antivenoms.
Given its areas of specialisation, you may have expected the CSL share price to soar amid the coronavirus pandemic. However, CSL isn’t heavily involved in the race for a COVID-19 vaccination.
That being said, the biotech giant has partnered with the University of Queensland in a COVID-19 vaccine development program. CSL is also investigating the role that immunoglobulin could play in terms of COVID-19 treatment here in Australia.
I think much of CSL’s earnings will continue to hold up despite the pandemic. The Aussie healthcare group already reaffirmed its earnings guidance in April 2020.
That alone doesn’t mean the CSL share price is in the buy zone. I think the key is to not overpay, even for high-quality ASX shares.
At $287.51 per share, I think CSL is trading cheaply right now. Even in the midst of the recent bear market, CSL shares fell to just $270.88 on 20 March.
The current price-to-earnings ratio of 42.55 times does look a touch high. However, I think the support around the current CSL share price level combined with a strong earnings profile is worth paying for in the current market.
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More reading
- 10 quality ASX shares to buy in June
- 3 fantastic ASX growth shares I would buy and hold for decades
- 5 things to watch on the ASX 200 on Friday
- ASX 200 rises again, ASX banks push higher
- Are ASX bank shares finally back in the buy zone?
Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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