What is SAN.PA's Intrinsic value?

Sanofi SA (SAN.PA) Intrinsic Value Analysis

Executive Summary

As of June 4, 2025, Sanofi SA's estimated intrinsic value ranges from $56.01 to $136.53 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $74.91 -13.7%
Discounted Cash Flow (5Y) $70.40 -18.9%
Dividend Discount Model (Multi-Stage) $56.01 -35.4%
Dividend Discount Model (Stable) $136.53 +57.4%
Earnings Power Value $119.78 +38.0%

Is Sanofi SA (SAN.PA) undervalued or overvalued?

With the current market price at $86.77, the stock appears to be fairly valued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Sanofi SA's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.0% 3.5%
Equity market risk premium 5.8% 6.8%
Adjusted beta 0.82 0.92
Cost of equity 7.8% 10.3%
Cost of debt 4.0% 7.0%
Tax rate 18.8% 19.5%
Debt/Equity ratio 0.17 0.17
After-tax WACC 7.1% 9.6%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 8.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $44,286 (FY12-2024) to $65,737 (FY12-2034)
  • Net profit margin expansion from 13% to 13%
  • Capital expenditures maintained at approximately 6% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $70 $99,496M 77.4%
10-Year Growth $75 $105,028M 57.6%
5-Year EBITDA $62 $89,679M 75.0%
10-Year EBITDA $70 $99,236M 55.1%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 37.4%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.0%
  • Long-term growth rate: 2.0%
  • Fair value: $56.01 (-35.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.3% (Low) to 7.8% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $78 to $195
  • Selected fair value: $136.53 (57.4% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $13,094M
Discount Rate (WACC) 9.6% - 7.1%
Enterprise Value $136,285M - $183,952M
Net Debt $13,056M
Equity Value $123,229M - $170,896M
Outstanding Shares 1,228M
Fair Value $100 - $139
Selected Fair Value $119.78

Key Financial Metrics

Metric Value
Market Capitalization $106533M
Enterprise Value $119589M
Trailing P/E 8.40
Forward P/E 18.68
Trailing EV/EBITDA 8.50
Current Dividend Yield 441.31%
Dividend Growth Rate (5Y) 4.76%
Debt-to-Equity Ratio 0.17

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $22.47
Discounted Cash Flow (5Y) 25% $17.60
Dividend Discount Model (Multi-Stage) 20% $11.20
Dividend Discount Model (Stable) 15% $20.48
Earnings Power Value 10% $11.98
Weighted Average 100% $83.73

Investment Conclusion

Based on our comprehensive valuation analysis, Sanofi SA's weighted average intrinsic value is $83.73, which is approximately 3.5% below the current market price of $86.77.

Key investment considerations:

  • Strong projected earnings growth (13% to 13% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.17)
  • Historical dividend growth of 4.76%

Given these factors, we believe Sanofi SA is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.