Should Investors Reassess Sanofi After 14% Drop and Fresh Migraine Drug Approval?

Thinking about what to do with Sanofi stock? You are not alone, especially after a year that has tested the patience of even long-term holders. The share price is down about 14.4% for the year so far, and off by 18.5% over the last twelve months. Yet, sometimes it is exactly this kind of cooling-off period that gets value-focused investors interested.

Sanofi is the sort of company that rarely becomes a market darling overnight, but its underlying story has not faded. While some peers have seen dramatic price surges or volatility tied to big pharma developments, Sanofi’s recent movement has been steady. There was a modest 1.5% uptick over the past week and a slight setback of 5.0% for the last month. That could signal investors are recalibrating their risk expectations, rather than walking away for good. Remember, over the last three and five years, Sanofi’s stock has still managed to generate a total return of 11.2%, suggesting that patient holders have not been left behind.

This brings us to a key question: is Sanofi actually undervalued? According to a comprehensive valuation framework, Sanofi scores a perfect 6 out of 6, meeting every single check for undervaluation. Numbers like that get attention, but the real story unfolds in how those valuation models actually work. Let us break down these approaches, and later, look at an even better way to get the full picture on whether Sanofi is truly a bargain.

Why Sanofi is lagging behind its peers

Approach 1: Sanofi Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting all future cash flows and discounting them back to what they would be worth in today’s euros. This method helps investors understand the real value of a business by focusing on cash it can generate into the future, rather than just today’s profits.

For Sanofi, the current Free Cash Flow stands at €8.17 billion. Analysts provide cash flow projections for the next five years, after which Simply Wall St extrapolates further using reasonable growth assumptions. Notably, Sanofi's Free Cash Flow is forecast to climb to around €9.37 billion by 2029. The model used is a 2 Stage Free Cash Flow to Equity, reflecting both near-term analyst expectations and longer-range growth trends.

Crunching these numbers, the DCF analysis arrives at a fair value for Sanofi shares of €179.63. This is substantially higher than the current market price, implying a 55.1% discount. In simple terms, the stock looks significantly undervalued based on projected future earnings power using the DCF framework.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Sanofi.

Our Discounted Cash Flow (DCF) analysis suggests Sanofi is undervalued by 55.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Sanofi Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric, especially for companies that are consistently profitable like Sanofi. It provides a straightforward snapshot of what investors are currently willing to pay for each euro of earnings. For established players with steady profits, the PE ratio is often considered more reliable for valuation than sales or book value multiples.

Of course, what constitutes a "normal" PE ratio will depend on factors such as a company's expected growth rates and perceived risks. High-growth companies or those with less risk tend to warrant higher PE ratios, while slower-growing or riskier firms generally see lower multiples.

Sanofi currently trades at a PE ratio of 15.4x, which is well below the pharmaceutical industry average of 25.1x and the average of its peers at 23.9x. However, industry and peer averages do not always capture company-specific characteristics. This is where Simply Wall St's proprietary “Fair Ratio” comes in. For Sanofi, the Fair Ratio is calculated to be 26.3x, reflecting its unique mix of earnings growth prospects, profit margins, market capitalization and specific risk factors.

The Fair Ratio approach is more comprehensive than a simple peer comparison because it tailors valuation expectations to each company’s actual fundamentals. This helps investors avoid overpaying for "hot" stocks or overlooking steady businesses with hidden strength. In Sanofi’s case, the current PE ratio of 15.4x is notably below its Fair Ratio of 26.3x, suggesting the stock is undervalued by this measure.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Sanofi Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is your personal story of how a company like Sanofi will grow. It mixes your perspective on future revenue, earnings, and profit margins with your view of a fair value, putting numbers and assumptions into context.

Narratives connect the dots between Sanofi’s business story, a forward-looking forecast, and a calculated fair value, letting you explore the “why” behind every estimate. They are designed to be easy and accessible, available right now for millions of investors on the Simply Wall St Community page. With Narratives, you and other investors can make clearer decisions about when to buy or sell by comparing the Fair Value you calculated to the current share price, all explained in plain language.

What really sets Narratives apart is that they update automatically when major news or earnings releases happen, so your analysis never falls behind reality. For example, some Sanofi Narratives reflect a very bullish scenario, expecting €22 billion in annual sales from key launches and expansions, and projecting a fair value as high as €124.8 per share. Others are more cautious, forecasting risk from pricing pressures and pipeline setbacks, with fair value estimates as low as €92.0.

Do you think there's more to the story for Sanofi? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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