CSL Limited (ASX: CSL) shares are a favourite blue-chip for many ASX investors but, with the share price near $200, are the shares overrated?
About CSL
CSL is Australia’s largest (and many might say ‘best’) health biotechnology company, specialising in biopharmaceuticals.
Founded in the late 1900s as the Commonwealth Serum Laboratories, ‘CSL’ was sold by the Australian Government to shareholders via the ASX in 1994 at only $2.30 a pop. It used the money to double its size through an international acquisition.
CSL is now a global leader in blood plasma vaccines (think: the flu, snake bite anti-venoms, etc.), providing relief for potentially life-threatening medical conditions.
Shares Struggle To Stay Above $200
Over the last 12 months, CSL shares have risen by 18.5%. In that time, they’ve been as high as $230 and as low as $170, so it hasn’t been a smooth ride.
More recent price movements paint a different picture of low growth, but still a lot of volatility. In a six-month period, the share price has risen only 4.7%, but again with a high of $202 and a low of $175.
Over the last month, the share price seems to have found a comfortable spot, growing just 0.5% and with much lower volatility.
The clear pattern over the last year has been that the share price averages around $200. I think this is about the fair value of CSL, although maybe it could stretch slightly higher – say $205?
Even if CSL shares are worth $205 though, that’s only a 2.5% increase from the current share price.
The current dividend yield on offer is just 1.23% — hardly groundbreaking.
So What Now?
I think CSL is a great business. In fact, I think it might actually be one of the highest-quality businesses Australia has to offer. However, I also think CSL shares have found their fair value around $200 and I don’t see much growth in the share price in the near future.
For another price, I wouldn’t hesitate to buy CSL shares. But with a low dividend yield and a share price very close to fair value, I think there are better ASX shares to buy right now.
A good place to start looking is the companies in the free report below.
3 Proven, Dividend-Paying Companies
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Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.
