October 19, 2021

The 5 most expensive companies on the ASX

Everyone loves a bargain but when it comes to investing, it pays to look beyond the share price. After all, investing is very different from, say, grocery shopping. When mangoes go on sale, it makes sense to buy more. After all, you’re getting the same delicious fruit for half the price. But if a share…

By Jack Derwin

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Everyone loves a bargain but when it comes to investing, it pays to look beyond the share price.

After all, investing is very different from, say, grocery shopping. When mangoes go on sale, it makes sense to buy more. After all, you’re getting the same delicious fruit for half the price.

But if a share price halves, it is generally a very different story. Typically the market has decided a company is no longer worth what it was once. The company’s value may have further to fall and investors might be right to steer clear.

Similarly, a high share price doesn’t necessarily mean a company is ‘expensive’, or overvalued. If Apple sells one million more iPhones than was expected, shares might soar. Despite the rising price, stronger sales might make it even more attractive to investors.

In other words, everything is relative.

CSL

While Australia isn’t home to the kind of eye-watering stock prices seen in the United States – where one share of Warren Buffett’s Berkshire Hathaway can set you back more than half a million dollars – there are some that fly well above the competition.

The first is CSL, which at a little south of $300 is the single priciest company on the ASX. The biotechnology giant develops and produces vaccines and therapies for a number of different health conditions, and was earlier this year put in charge of producing AstraZeneca locally.

A market darling, the company’s share price has grown 1,000% in the last decade, making long-term investors very happy along the way, and requiring new ones to shell out in order to buy in.

On one hand, shares are considered ‘expensive’ by some, priced at more than 42 times earnings. On the other hand, CSL is trading at a 12% discount on the all-time high posted before the pandemic struck. With a strong track record of growth, it may still look good to those who believe in the growing healthcare market.

Macquarie Group

Often forgotten about in discussions of the major banks, Macquarie Group is another Australian powerhouse.

Trading at around $183, investment bank Macquarie has increased its share price eight-fold since 2011 as the investment bank continues to grow aggressively. Controlling more than $550 billion worth of assets, with funds across tourism, infrastructure, and property, the bank has been nicknamed the ‘millionaire’s factory’ for sharing 40% of its bumper profits with employees.

The generous financial incentive has helped Macquarie cement a track record of year-on-year growth.

Domino’s Pizza

Domino’s is not only Australia’s largest pizza chain, but also has a significant global footprint with around 3,000 stores worldwide. But priced at around $140 a slice, the ASX-listed company comes at a premium to its pizza menu.

Unlike some companies, Domino’s has actually gone from strength to strength during the pandemic. As restaurants and cafes closed during lockdowns, Domino’s boomed on the back of strong takeaway trade and an aggressive expansion strategy.

Its share price tripled in the 18 months to September, as the company unveiled plans to double the number of stores worldwide over the next 10 years. Down 15% in the last month however, investors may have bitten off more than they can chew.

Cochlear Limited

While Australians may not be as familiar with the company itself, most would recognise the name of its eponymous product, the Cochlear hearing implant. Pioneered by Australian professor Graeme Clark, the multichannel device has returned the gift of hearing to deaf people around the world.

From humble beginnings, Cochlear Limited has quadrupled its share price in the last decade to around $216 a share. After taking a tumble last year however, it is yet to return to its previous peak recorded at the start of 2020. But after the pandemic froze elective surgeries around the world, a global reopening could help ease pressure on sales.

REA Group

In a country in which house prices are a national complaint, it’s perhaps fitting that REA Group comes with one of the ASX’s largest price tags. Doing exactly what it says on the tin, REA has built an empire on the back of real estate advertising, with offices in Melbourne, Hong Kong, Kuala Lumpur and Bangkok.

Majority owned by News Corp, the publicly listed media empire, REA Group’s performance on the ASX has dwarfed even Australia’s runway property price growth. In the last 10 years, REA’s share price has soared around 1,300%, with investors hoping there’s still some more room to build.

Xero

While the ASX has plenty of large legacy businesses on its books (think BHP, CBA and Telstra), there are also a group of hot tech companies making their mark.

New Zealand-born cloud-based accounting software Xero is one of them. By far the youngest stock on this list, the disrupter has managed to attract more than 2.7 million businesses across Australia, New Zealand, Britain, the U.S, and beyond.

Reflecting its rapid growth, Xero’s share price has exploded, soaring 30-fold in the last nine years, and 80% since the start of 2020.

Sky-high share prices

As with all the companies on this list, it goes to show that for investors looking to build wealth, a company’s long-term value can be far more important than its short-term price.