CSL share price in focus
Previously a government body, CSL is today a publicly-listed global biotechnology company that develops and delivers innovative medicines that save lives, protect public health, and help people with life-threatening medical conditions live full lives.
The company is divided into three core business units: CSL Behring, CSL Seqirus and CSL Vifor. Behring, acquired in 2004, manufactures and distributes blood plasma products. Seqirus is responsible for making flu-related products and performs pandemic-related services for governments. Finally, Vifor makes products for iron deficiency and nephrology (renal/kidney care).
CSL has developed a strong reputation with Australian investors over many decades as being a reliable company and a consistent dividend payer. With the continual rise in healthcare costs and the consistent historical performance, interest in CSL shares remains high today.
The key metrics
If you’ve ever tried to read a company’s income statement on the annual report, you’ll know it can get pretty complex. While there are any number of figures you could pull from this statement, three key ones are revenue, gross margin, and profit.
Revenue is important for obvious reasons – everything starts here. If you can’t generate revenue, you can’t generate profit. What we’re concerned about is not so much the absolute number, but the trend. CSL last reported an annual revenue of $14,800m with a compound annual growth rate (CAGR) over the last 3 years of 12.8% per year.
Moving down the income statement, we then get to gross margin. The gross margin tells us how profitable the core products/services are – before you take into account all the overhead costs, how much money does the company make from selling $100 worth of goods or services? CSL’s latest reported gross margin was 52.1%.
Finally, we get to profit, arguably the most important figure. Last financial year CSL Ltd reported a profit of $2,642m. That compares to 3 years ago when they made a profit of $2,375m, representing a CAGR of 3.6%.
Financial health of CSL shares
The next thing we need to consider is the capital ‘health’ of the company. What we’re trying to assess here is whether they’re generating a reasonable return on their equity (the total shareholder value) and have a decent safety buffer. One measure we can look at is net debt. This is simply the total debt minus the company’s cash holdings. In the case of CSL, the current net debt sits at $10,526m.
A high number here means that a company has a lot of debt which potentially means higher interest payments, greater instability, and higher sensitivity to interest rates. A negative value on the other hand indicates the company has more cash than debt (a useful safety buffer).
However, arguably more important is the debt/equity percentage. This tells us how much debt the company has relative to shareholder ownership. In other words, how leveraged is the company? CSL has a debt/equity ratio of 62.8%, which means they have more equity than debt.
Finally, we can look at the return on equity (ROE). The ROE tells us how much profit a company is generating as a percentage of its total equity – high numbers indicate the company is allocating capital well and generating value, while a low number suggests the profits might offer more value if they were paid to shareholders as a dividend. CSL generated an ROE of 14.6% in FY24.
What to make of CSL shares?
With strong revenue growth over the last 3 years, profits trending upwards, and a solid ROE, CSL shares could be worth adding to your ASX share price watchlist.
Please keep in mind that these figures are important but should only be the beginning of your research. It’s important to get a good grasp of the company’s financials and compare it to its peers. It’s also very important to make sure the company is priced fairly. To learn more about share price valuation, you can sign up for one of our many free online investing courses.
