On any measure, healthcare group CSL (CSL) has delivered a bounty for shareholders.
Net earnings were up 19%, rising to 21% once the currency effect is taken into account along with an 18% lift in the dividend.
There is no doubt CSL has had a great run, its strong advance driven by investor appetite for defensive stocks and with a free kick from a declining Australian dollar to its foreign earnings (see Adam Carr's Recession proofing your stock portfolio).
But as they say in all those warnings, past performance is no indication of future earnings. And with the stock priced at a lofty 27 times earnings, disillusionment is always close at hand.
The result today was greeted by an avalanche of selling with the stock diving 2.5%.
Given the company’s best idea for the future is to buy back its own shares, the alarm started ringing from the second the results were delivered.
After such a strong performance, CSL boss Paul Perreault reckons the company will only manage 10% growth in the year ahead, indicating a sharp slowdown in growth.
The dividend also was a disappointment. CSL is paying out just half its earnings with a yield of just 1.6% so the dividend support is a vital factor missing from the equation.
Simply put, 10% growth simply doesn’t justify such an enormous premium.