Is Sanofi Stock A Buy At Current Prices?

With shares of Sanofi (NYSE:SNY) trading around $52, is SNY an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Sanofi is a global and diversified healthcare company based in France. The company aims to discover, develop, and distribute therapeutic solutions to patients in need. Its primary focus is in the field of healthcare with six growth platforms: diabetes solutions, human vaccines, innovative drugs, consumer healthcare, emerging markets and animal health. Sanofi is active domestically and abroad, including other European countries, North and Latin Americas, Asia, Africa and Middle East.

Sanofi is being investigated in China for bribing doctors in a bid to raise sales in 2007. The company maintains it is taking the allegations seriously, though declining to comment on the matter currently. One of the company’s offices was visited earlier this year by the State Administration for Industry and Commerce as the Chinese government attempts to root out corruption.

T = Technicals on the Stock Chart are Mixed

Sanofi stock has been trending higher over the last several months. The stock is now trading slightly below all-time high prices so it may need some time before it gets going once again. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Sanofi is trading between its key averages which signal neutral price action in the near-term.

SNY

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Sanofi options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Sanofi Options

22.80%

43%

41%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Sanofi’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sanofi look like and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

-60.71%

-46.60%

-71.10%

-24.08%

Revenue Growth (Y-O-Y)

-7.07%

-12.14%

-0.71%

-3.91%

Earnings Reaction

-0.83%

4.03%

-4.31%

2.78%

Sanofi has seen decreasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Sanofi’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has Sanofi stock done relative to its peers, Pfizer (NYSE:PFE), Merck (NYSE:MRK), GlaxoSmithKline (NYSE:GSK), and sector?

Sanofi

Pfizer

Merck

GlaxoSmithKline

Sector

Year-to-Date Return

11.63%

16.11%

18.30%

18.54%

14.93%

Sanofi has been a weak relative performer, year-to-date.

Conclusion

Sanofi provides valuable healthcare products to consumers in all parts of the world. The company is currently being accused of bribing doctors in China in order to boost sales in 2007. The stock has been trending higher but is now consolidating as it digests gains from a recent run. Over the last four quarters, investors in the company have had mixed feelings as earnings and revenue figures have been decreasing. Relative to its peers and sector, Sanofi has been a poor year-to-date performer. WAIT AND SEE what Sanofi does this coming quarter.

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