CSL Fundamental Analysis

Firstly this is a thread to discuss the future fundamental analysis of CSL earnings evolution against the share price.

Remember in the short term the market is a voting machine, in the long term a weighing machine.

This means who knows how the market will price CSL securities in the short term (ie a voting machine). That 'voting machine' is very weak at the moment. CSL has been a 'market darling' for so long, that its many retail and 'wealth advisor's client portfolio' already have a high weighting in their share porfolio account.. Long term share price hubris will result in this. Long term shareholders are bitterly disappointed with the current share price. To add to 'voting machine' weakness, there have been so many 'investors' buying any dip from the historical $300 level, that they are also severely burnt.

Many new share holders bought significantly into all price corrections from $300, whether that's $280, $250, $240, $200. That their portfolio's are now stuffed with CSL shares already, and don't have either the funds, required portfolio diversification, or courage now that the share price has really tanked.

Its been a historical case of 'buy' CSL at any price because of the quality nature of the underlying quality business, together with the ever increasing historical share price increase reinforcing the corrective 'buy' of the securitis with total disregard to the price paid for those securities . This focus solely on the 'quality' of the underlying business without considering the price paid for that underlying business has led to massive wealth destruction. But that 'wealth destruction' is only very very recent. For so many years the share price carried on upwards, increasing further and further away from its fundamental intrinsic value:



ie the price paid for a unit of the business, ie the share price, far exceeded the value of a unit of the business, even though the underlying business is 'quality' and that the underlying business is growing earnings over time (just not at fast enough rate to justify the share price increase)

Or in Warren Buffet's terminology: over pay and the future returns will be substandard.

This problem has now been exacerbated by the fact, confirmed by management, that the future earnings growth is going to lag historical earnings growth. This has been conveyed by management not just for FY26 but into FY27 and FY28.

So now just as the market expected the historical growth rate to continue into the future a did the share price grow faster than the reasonable earnings a double whammy occurs, the earnings growth is going to grow slower than historically expected.

This is seeing CSL share price drop in a real tizz. All the historical rational for holding CSL at previous historical prices are unraveling fast.

This is NOT MANGEMENT FAULT, the market was to exurbarant about the price it was will to pay for a share of CSL. And again in the short term the market is a voting machine, that voting machine was saying 'buy buy' CSL, don't do any fundamental analysis, everything will be ok because the market will continue to price the share price higher and higher over time regardless of earnings growth.

And now BAM.

So let's go back to basics and think of some of the purely fundamental parts of the business.

Then let's see what is CSL absolute valuation.