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Understanding Sanofi’s Valuation Compared to Peers

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A look at Sanofi’s valuation

Sanofi (SNY) is headquartered in Paris and reports its financial results in euros. Sanofi’s top line has risen on rising sales in its Genzyme, Animal Health, and Vaccines segments.

From an investor’s point of view, the two best valuation multiples used for evaluating companies like Sanofi are the forward PE (price-to-earnings) and forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiples, considering such companies’ relatively stable earnings.

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Forward PE

PE multiples represent what one share can buy for an equity investor. As on March 31, 2017, Sanofi was trading at a forward PE multiple of ~14.4x, as compared to the industry average of 16.3x. Over the past year, the company’s forward PE has been in the range of 12.0x and 16.2x.

By comparison, competitors GlaxoSmithKline (GSK), Pfizer (PFE), and Novo Nordisk (NVO) are trading at a forward PE multiple of 15.9x, 13.2x, and 15.3x, respectively.

Forward EV-to-EBITDA

On a capital structure neutral and excess cash-adjusted basis, Sanofi was trading at a forward EV-to-EBITDA multiple of 10.3x, as compared to the industry average of ~11.3x, as on March 31, 2017. Peers GlaxoSmithKline (GSK), Pfizer (PFE), and Novo Nordisk (NVO) are trading at a forward EV-to-EBITDA multiples of 9.5x, 10.2x, and 8.5x, respectively.

Analyst recommendations

Sanofi’s stock has risen ~10.2% over the past 12 months. Analysts estimate that the stock has the potential to return ~4.8% over the next 12 months. The analysts’ recommendations show a 12-month targeted price of $47.00 per share, as compared to its price of $44.85 per share on March 30, 2017.

Notably, 67% of the analysts recommend a “buy” for the stock, while 33% of the analysts recommend a “hold.” Remember, changes in analyst estimates and recommendations are based on changing trends in the stock price.

To divest risk, investors can consider ETFs like the Vanguard FTSE Europe ETF (VGK), which has 1.3% of its total assets in Sanofi, 1.3% of its total assets in GlaxoSmithKline (GSK), and 1.2% of its total assets in Novo Nordisk (NVO).

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