Sanofi (SNY) is a mature pharma company that is slowly approaching its 52 week highs. The stock looks like it is about fairly valued but it is a bit undervalued on the forward relative metric. It has a healthy payout with a dividend yield in the 4-5% range.
SNY recently reported strong Q1 results as revenues grow 7% y/y and EPS rose over 7% - a healthy clip for a company with a market cap of over $100 billion. The strong performance was driven by Genzyme, its growth platforms, and cost savings. The quarter also reflected the production recovery of Genzyme with the first shipment of Fabrazyme produced in Framingham in March. One risk for the company is the fact that Plavix will lose exclusivity in May in the U.S. Below is an in depth look at the valuation metrics and stock chart.
Valuation: Sanofi's trailing 5 year valuation metrics suggest that the stock is fairly valued as there is a mixed message about the valuation metrics compared to their 5 year averages. Sanofi's current P/S ratio is 2.1 and it has averaged 2.3 over the past 5 years with a high of 3.1 and low of 1.9. Sanofi's current P/E ratio is 12.2 and it has averaged 10.4 over the past 5 years with a high of 16.8 and low of 6.7.
Price Target: The consensus price target for the analysts who follow Sanofi is $42. That is upside of 8% from today's stock price of $38.34 and suggests that the stock is overvalued at these levels. This also suggests that the stock has limited upside and should be avoided at its current stock price.
Forward Valuation: Sanofi is currently trading at about $38 a share with analysts expecting EPS of $3.9 next year, an earnings increase of 1% y/y, for a forward P/E ratio of 9.8. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. GlaxoSmithKline (GSK) is currently trading at about $47 a share with analysts expecting EPS of $3.87 next year, an earnings increase of 10% y/y, for a forward P/E ratio of 12. Merck (MRK) is currently trading at about $39 a share with analysts expecting EPS of $3.7 next year, an earnings decline of 3% y/y, for a forward P/E ratio of 10.6. Pfizer (PFE) is currently trading at about $23 a share with analysts expecting EPS of $2.35 next year, an earnings increase of 4% y/y, for a forward P/E ratio of 9.7. The mean forward P/E of Sanofi's competitors is 10.8 which suggests that Sanofi is fairly valued relative to its publicly traded competitors.
Earnings Estimates: Sanofi has beat EPS estimates 3 times in the past 4 quarters. The company's EPS figures have come in between -62 cents and 9 cents from consensus estimates or about -52% to 8% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside from earnings surprises.
Price Action: Sanofi is down 5.5% over the past year, underperforming the S&P 500, which is up 5.5%. Looking at the technicals, the stock is currently above its 50 day moving average, which sits at $37.81 and above its 200 day moving average, which sits at $35.89.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.