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CSL Limited (ASX:CSL): Is It A Good Long Term Opportunity?

Simply Wall St

In August 2019, CSL Limited (ASX:CSL) released its latest earnings announcement, which showed that the company gained from a robust tailwind, leading to a double-digit earnings growth of 11%. Investors may find it useful to understand how market analysts perceive CSL's earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

View our latest analysis for CSL

Analysts' outlook for the coming year seems rather subdued, with earnings increasing by a single digit 6.6%. The growth outlook in the following year seems much more buoyant with rates generating double digit 24% compared to today’s earnings, and finally hitting US$2.6b by 2022.

ASX:CSL Past and Future Earnings, September 3rd 2019

Even though it’s helpful to be aware of the growth rate year by year relative to today’s level, it may be more insightful to gauge the rate at which the business is moving every year, on average. The advantage of this method is that we can get a better picture of the direction of CSL's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I've appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 10%. This means that, we can assume CSL will grow its earnings by 10% every year for the next few years.

Next Steps:

For CSL, I've put together three essential aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is CSL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CSL is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CSL? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.