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Sanofi: Should Value Investors Consider SNY Stock?


Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Sanofi SNY stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Sanofi has a trailing twelve months PE ratio of 15.06, as you can see in the chart below:

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.30. If we focus on the long-term PE trend, Sanofi’s current PE level puts it slightly above its midpoint of 14.25 over the past five years, with the number having risen rapidly over the past few months.

Further, the stock’s PE also compares favorably with the Zacks classified Medical sector’s trailing twelve months PE ratio, which stands at 19.60. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Sanofi’s forward PE is roughly same as its trailing twelve months value, so we might say that the forward earnings estimates are incorporated in the company’s share price as of now. We define forward PE as current price relative to the Zacks Consensus Estimate for the current fiscal year.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Sanofi has a P/S ratio of about 3.08. This is a bit lower than the S&P 500 average, which comes in at 3.15 right now.

Broad Value Outlook

In aggregate, Sanofi currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Sanofi a solid choice for value investors.

What About the Stock Overall?

Though Sanofi might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘F’ and a Momentum score of ‘C’. This gives SNY a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)

Notably, the company’s recent earnings estimates have been somewhat encouraging. Both, the current quarter and full year estimates have seen one upward revision each, compared with no downward revisions, in the last 60 days.

This has had a meaningful impact on the consensus estimate as the current quarter consensus estimate has risen by 12.9% in the past two months, while the full year estimate has inched higher by 3.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Sanofi Price and Consensus

Sanofi Price and Consensus | Sanofi Quote

Thanks to this bullish trend, the stock boasts a Zacks Rank #2 (Buy), which indicates why we are looking for outperformance from the company in the near term.

Bottom Line

Sanofi is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. While the Zacks categorized Large Cap Pharmaceutical industry has underperformed the broader market in the last two years, this Zacks Rank #2 stock ranks among the Top 20% of all Zacks industries. This hints at favorable broader prospects, alongside signaling chances of revival.

So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.

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