ASX healthcare hammered! Where’s the bottom for CSL, COH, RMD and TLX?

For a sector many self-funded retirees and growth investors alike have long treated as one of the sturdiest anchors in an ASX portfolio, FY26 delivered a gut punch. Healthcare was the ASX's second-worst performing sector, down over 36% for the year – but for some household names like CSL (CSL), Cochlear (COH) – losses were in excess of 50%.

ASX sector performance table FY26, and FY27 (to date) for comparison. Note: All values are total return, and therefore account for dividends and capital gains/losses. Source: Norgate Data

I know what you’re thinking: more than half price, there must be a bunch of bargains in the sector!

That's rarely how markets work. Prices don't plunge over 50% without a reason, and since share prices are ultimately a reflection of earnings, a near-halving in sector value usually implies the market expects earnings to fall by roughly the same magnitude.

To test this assumption, I've gone through the latest forecast for four major ASX healthcare stocks – CSL, COH, Resmed (RMD), and Telix Pharmaceuticals (TLX) – to work out whether the earnings picture actually supports the scale of the sell-off.

No earnings collapse: the numbers don’t stack up

If the sector had genuinely halved on collapsing profits, you'd expect forecast earnings per share (EPS) growth to be deeply negative across the board. It isn't.

CSL, COH, RMD, TLX Refinitiv earnings per share (EPS) forecasts FY26-28. Source: Refinitiv (LSEG) consensus EPS estimates. Note: CSL, RMD, and Telix report in USD. A = actual, E = Estimate.

What explains a share price sell-off so severe when three of these four stocks are forecast to grow earnings at least until FY28, and even CSL's near-term dip is measured in single digits?

In a research note covering the sector released Friday, investment bank UBS shared its latest estimates for the sector along with its key sector picks. UBS's own forecasts paint a rockier near-term picture than the broader consensus – EPS down 13% for CSL and 21% for COH in FY26 – but even on this more cautious view, the earnings damage doesn't come close to explaining share prices that have, in some cases, more than halved.

CSL, COH, RMD, TLX 12 month share price (SP) performance versus UBS EPS Forecasts FY26-27. Source: UBS, Australian Healthcare Sector Keys, 24 July 2026, Norgate Data

The ASX Healthcare sector’s share price performance is almost certainly being dragged down disproportionately by CSL, whose $55 billion market capitalisation is about the same as the other three major sector constituents considered here combined. UBS has CSL's EPS rebounding a modest 2% in FY27 – so the contraction appears localised to the current 2026 financial year, again highlighting the disconnect between EPS forecasts and CSL’s -53% share price performance.

CSL share price chart

COH's forecast 21% EPS decline in FY26, before an 11% snap-back in FY27, stands out too, making its 63% price decline in the last 12 months also looks disproportionate. The disconnect is even more pronounced for RMD which is forecast to keep growing earnings 8% in both FY26 and FY27 (32% 12 month share price decline), and TLX's earnings base – still tiny in dollar terms – is scaling up rapidly rather than shrinking (33% 12 month share price decline).

COH share price chart

‘Multiple compression’ – the new ‘why it fell’ explain-all!

So, what explains a sell-off this severe when only two of these four stocks are actually forecast to see earnings shrink, and even those two aren't shrinking anywhere near 50%?

Before going further, it's worth explaining what a "multiple" actually is. When you buy a share, you're really buying a claim on a stream of future earnings, and the price-to-earnings (P/E) multiple is simply the price you're paying today for each dollar of that profit. A stock on a P/E of 10 times means you're paying $10 for every $1 of annual earnings; a stock on 30 times means you're paying $30 for that same $1. The multiple isn't fixed – it's the market's collective judgement of what that dollar of earnings is worth, and that judgement moves.

Investors pay a greater price for earnings they trust will keep growing, and for businesses with a genuine edge – market leadership, pricing power, high barriers to entry – because that combination makes the earnings stream both bigger over time and more likely to eventuate. A dollar of profit compounding reliably at double digits for the next decade is worth substantially more than one that isn’t. 

CSL and COH are textbook examples of stocks that have typically commanded a premium. Both built decades-long reputations as quality compounders – CSL as a global leader in blood plasma products, COH as the dominant player in hearing implants – with high margins and a long runway of consistent double-digit earnings growth. That reputation is exactly why both have traditionally traded on some of the richest P/E multiples on the ASX: investors were happy to pay up because the growth felt dependable. 

When that trust erodes, multiples "compress", which in practical terms translates into lower P/E ratios. Investors are less willing to pay for a dollar of the same earnings.

In my view there are two forces that have driven multiple compression in the healthcare sector. The first is macro, and applicable to higher P/E stocks in general: as benchmark bond yields have risen, appetite for expensive growth stocks with earnings far into the future has cooled across the market. The time value of money ensures that these stocks are hit the hardest when market yields rise.

The second is company-specific, and it's a track record problem: both CSL and COH have been through a run of earnings downgrades over the past 18 months. CSL cut its own FY26 revenue growth guidance from 4–5% to just 2–3% this year on weaker immunoglobulin and albumin sales, while COH slashed its own FY26 underlying profit guidance by close to a third.

Each downgrade chips away at the market's confidence that the old growth trajectory is still intact, and the multiple gets marked down accordingly – often before the next result even confirms whether the caution was warranted.

Source: Morningstar (historical P/E, 2020–2025) and UBS (forecasts FY26-27) Australian Healthcare Sector Keys, 24 July 2026. Telix is plotted on the right-hand scale as it has swung from loss-making in previous years to profitability in 2026-27. 

You can see this playing out in the actual historical numbers. According to Morningstar data, CSL's P/E multiple has been sliding for years – from a peak above 40 times earnings in 2020, down to 25.7 times by 2025 – and UBS now forecasts it more than halving again to 12.7 times for FY26. That's a compression of around 70% from its 2020 peak. COH's story is more abrupt: it traded as high as 70 times earnings in 2021 and was still fetching over 50 times as recently as 2025, before UBS's forecast has it collapsing to 23.7 times for FY26 – a near two-thirds compression from its 2021 peak. RMD has de-rated from 43.7 times in 2020 down to 17.1 times on UBS's FY26 estimate – roughly a 60% compression.

Is there more compression to come, or has the de-rating largely run its course? With the exception of TLX, the current multiples already look considerably more modest than the lofty readings of the early 2020s – CSL's in particular. At 12.7 times FY26 earnings and 12.5 times for FY27, CSL is now trading closer to the kind of multiple you'd expect from a mature, low-growth industrial than the premium compounder it traded as through 2020–2023. But, going on UBS’s forecasts, there's little to suggest CSL, COH, and RMD are about to re-rate back toward their premier growth stock peaks. 

Three buys, one hold

UBS considers three of the four stocks surveyed here a buy, CSL, RMD and TLX, with COH rated as neutral, and each has a striking gap between share price and price target.

• CSL's $158 target implies roughly 36% upside. Despite Behring margins bottoming out in the second half of FY26 and Vifor sales unravelling on generic competition and the Tavneos withdrawal, UBS expects immunoglobulin volumes to recover in FY27 as CSL rebuilds market share, and reckons the vaccines business isn't as troubled as feared.

• COH's $106 target sits about 7% below where the stock currently trades. The Nexa hearing implant launch has proven tougher than anticipated, and an ageing, more economically sensitive US patient base creates real risk to FY27 guidance – even as the long-term opportunity (a large, under-penetrated market with few alternative treatments) remains intact.

RMD share price chart

• RMD's US$300 target implies about 53% upside, with margin expansion from manufacturing efficiencies the key driver – though Astral ventilator production constraints, a possible Philips Respironics return to the US, and GLP-1 competition are all flagged as risks to watch.

TLX share price chart

• TLX's $31 target implies the largest gap of all, over 100% upside, underpinned by share gains from its Illuccix/Gozellix diagnostic combo, a BiPASS trial that could more than double the addressable market by 2030, and a therapeutic pipeline – including the TLX591 prostate cancer candidate – that offers upside beyond the current diagnostics business.

Conclusion: mind the gap

It's tempting to read the gap between how far these share prices have fallen and how little their forecast earnings have actually moved as proof the market has overreacted – that there's a bargain sitting here for the taking. 

The gap really is the whole story. What's played out across ASX healthcare over the past 12 months looks far more like a de-rating of growth multiples than a genuine earnings collapse, but the end result for anyone holding these stocks is identical either way – a worse-off portfolio. 

That's the real lesson: investors can change their mind, suddenly and substantially, about what a dollar of a company's earnings is worth: the moment they stop believing the growth will keep showing up. Watching EPS forecasts alone won't catch that shift – but understanding when a stock is no longer delivering on its growth promise will.

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This article draws on institutional research from UBS, Australian Healthcare Sector Keys (24 July 2026), historical valuation data from Morningstar, and consensus earnings estimates from Refinitiv (LSEG).