Intrinsic value of Sanofi ADR - SNY

Previous Close

$49.62

  Intrinsic Value

$48.60

stock screener

  Rating & Target

hold

-2%

Previous close

$49.62

 
Intrinsic value

$48.60

 
Up/down potential

-2%

 
Rating

hold

We calculate the intrinsic value of SNY stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 125.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -0.44
  9.80
  9.32
  8.89
  8.50
  8.15
  7.83
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
Revenue, $m
  36,632
  40,222
  43,971
  47,879
  51,948
  56,181
  60,583
  65,157
  69,911
  74,851
  79,986
  85,324
  90,875
  96,651
  102,663
  108,923
  115,446
  122,245
  129,336
  136,734
  144,458
  152,524
  160,951
  169,759
  178,969
  188,603
  198,683
  209,233
  220,279
  231,846
  243,963
Variable operating expenses, $m
 
  33,370
  36,084
  38,913
  41,859
  44,923
  48,110
  51,421
  54,863
  58,439
  62,156
  61,768
  65,787
  69,968
  74,320
  78,852
  83,574
  88,496
  93,630
  98,986
  104,577
  110,416
  116,517
  122,893
  129,561
  136,535
  143,832
  151,470
  159,466
  167,840
  176,611
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  30,249
  33,370
  36,084
  38,913
  41,859
  44,923
  48,110
  51,421
  54,863
  58,439
  62,156
  61,768
  65,787
  69,968
  74,320
  78,852
  83,574
  88,496
  93,630
  98,986
  104,577
  110,416
  116,517
  122,893
  129,561
  136,535
  143,832
  151,470
  159,466
  167,840
  176,611
Operating income, $m
  6,382
  6,852
  7,887
  8,966
  10,089
  11,258
  12,473
  13,736
  15,049
  16,412
  17,830
  23,556
  25,088
  26,683
  28,342
  30,071
  31,872
  33,749
  35,706
  37,749
  39,881
  42,108
  44,434
  46,866
  49,409
  52,068
  54,851
  57,764
  60,813
  64,007
  67,352
EBITDA, $m
  9,866
  12,441
  13,600
  14,809
  16,067
  17,377
  18,738
  20,153
  21,623
  23,151
  24,740
  26,391
  28,108
  29,894
  31,753
  33,690
  35,707
  37,810
  40,003
  42,292
  44,681
  47,175
  49,782
  52,506
  55,355
  58,335
  61,453
  64,716
  68,132
  71,710
  75,458
Interest expense (income), $m
  423
  621
  786
  958
  1,136
  1,323
  1,516
  1,718
  1,927
  2,144
  2,370
  2,605
  2,849
  3,103
  3,368
  3,643
  3,929
  4,227
  4,539
  4,863
  5,201
  5,555
  5,924
  6,309
  6,712
  7,134
  7,574
  8,035
  8,518
  9,023
  9,552
Earnings before tax, $m
  5,993
  6,231
  7,101
  8,008
  8,953
  9,936
  10,957
  12,019
  13,122
  14,268
  15,460
  20,950
  22,239
  23,579
  24,975
  26,428
  27,942
  29,521
  31,168
  32,886
  34,680
  36,553
  38,511
  40,557
  42,696
  44,935
  47,277
  49,728
  52,295
  54,983
  57,799
Tax expense, $m
  1,400
  1,682
  1,917
  2,162
  2,417
  2,683
  2,958
  3,245
  3,543
  3,852
  4,174
  5,657
  6,004
  6,366
  6,743
  7,136
  7,544
  7,971
  8,415
  8,879
  9,363
  9,869
  10,398
  10,950
  11,528
  12,132
  12,765
  13,427
  14,120
  14,845
  15,606
Net income, $m
  4,970
  4,548
  5,184
  5,846
  6,536
  7,253
  7,999
  8,774
  9,579
  10,416
  11,285
  15,294
  16,234
  17,213
  18,232
  19,293
  20,398
  21,550
  22,752
  24,007
  25,316
  26,684
  28,113
  29,606
  31,168
  32,802
  34,512
  36,302
  38,175
  40,138
  42,193

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  10,875
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  110,473
  109,299
  119,485
  130,105
  141,163
  152,667
  164,627
  177,058
  189,976
  203,400
  217,353
  231,858
  246,944
  262,638
  278,975
  295,987
  313,711
  332,187
  351,456
  371,561
  392,548
  414,466
  437,366
  461,302
  486,330
  512,508
  539,900
  568,569
  598,584
  630,017
  662,943
Adjusted assets (=assets-cash), $m
  99,598
  109,299
  119,485
  130,105
  141,163
  152,667
  164,627
  177,058
  189,976
  203,400
  217,353
  231,858
  246,944
  262,638
  278,975
  295,987
  313,711
  332,187
  351,456
  371,561
  392,548
  414,466
  437,366
  461,302
  486,330
  512,508
  539,900
  568,569
  598,584
  630,017
  662,943
Revenue / Adjusted assets
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
Average production assets, $m
  22,622
  24,857
  27,174
  29,589
  32,104
  34,720
  37,440
  40,267
  43,205
  46,258
  49,431
  52,730
  56,161
  59,730
  63,446
  67,315
  71,346
  75,547
  79,929
  84,502
  89,275
  94,260
  99,468
  104,911
  110,603
  116,557
  122,786
  129,306
  136,132
  143,281
  150,769
Working capital, $m
  10,821
  1,971
  2,155
  2,346
  2,545
  2,753
  2,969
  3,193
  3,426
  3,668
  3,919
  4,181
  4,453
  4,736
  5,030
  5,337
  5,657
  5,990
  6,337
  6,700
  7,078
  7,474
  7,887
  8,318
  8,769
  9,242
  9,735
  10,252
  10,794
  11,360
  11,954
Total debt, $m
  19,619
  22,463
  27,362
  32,471
  37,789
  43,323
  49,076
  55,055
  61,269
  67,726
  74,437
  81,414
  88,670
  96,219
  104,077
  112,260
  120,785
  129,672
  138,940
  148,611
  158,706
  169,248
  180,263
  191,776
  203,815
  216,406
  229,582
  243,372
  257,809
  272,928
  288,765
Total liabilities, $m
  49,729
  52,573
  57,472
  62,581
  67,899
  73,433
  79,186
  85,165
  91,379
  97,836
  104,547
  111,524
  118,780
  126,329
  134,187
  142,370
  150,895
  159,782
  169,050
  178,721
  188,816
  199,358
  210,373
  221,886
  233,925
  246,516
  259,692
  273,482
  287,919
  303,038
  318,875
Total equity, $m
  60,744
  56,726
  62,013
  67,525
  73,264
  79,234
  85,442
  91,893
  98,598
  105,565
  112,806
  120,334
  128,164
  136,309
  144,788
  153,617
  162,816
  172,405
  182,406
  192,840
  203,732
  215,108
  226,993
  239,416
  252,405
  265,992
  280,208
  295,087
  310,665
  326,979
  344,067
Total liabilities and equity, $m
  110,473
  109,299
  119,485
  130,106
  141,163
  152,667
  164,628
  177,058
  189,977
  203,401
  217,353
  231,858
  246,944
  262,638
  278,975
  295,987
  313,711
  332,187
  351,456
  371,561
  392,548
  414,466
  437,366
  461,302
  486,330
  512,508
  539,900
  568,569
  598,584
  630,017
  662,942
Debt-to-equity ratio
  0.323
  0.400
  0.440
  0.480
  0.520
  0.550
  0.570
  0.600
  0.620
  0.640
  0.660
  0.680
  0.690
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.790
  0.800
  0.810
  0.810
  0.820
  0.820
  0.830
  0.830
  0.840
Adjusted equity ratio
  0.503
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519
  0.519

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,970
  4,548
  5,184
  5,846
  6,536
  7,253
  7,999
  8,774
  9,579
  10,416
  11,285
  15,294
  16,234
  17,213
  18,232
  19,293
  20,398
  21,550
  22,752
  24,007
  25,316
  26,684
  28,113
  29,606
  31,168
  32,802
  34,512
  36,302
  38,175
  40,138
  42,193
Depreciation, amort., depletion, $m
  3,484
  5,588
  5,713
  5,843
  5,978
  6,119
  6,265
  6,417
  6,575
  6,739
  6,910
  2,835
  3,019
  3,211
  3,411
  3,619
  3,836
  4,062
  4,297
  4,543
  4,800
  5,068
  5,348
  5,640
  5,946
  6,266
  6,601
  6,952
  7,319
  7,703
  8,106
Funds from operations, $m
  8,725
  10,137
  10,897
  11,689
  12,514
  13,372
  14,264
  15,190
  16,154
  17,155
  18,195
  18,129
  19,254
  20,424
  21,643
  22,912
  24,234
  25,612
  27,050
  28,550
  30,116
  31,751
  33,460
  35,247
  37,115
  39,069
  41,114
  43,254
  45,494
  47,841
  50,299
Change in working capital, $m
  437
  176
  184
  191
  199
  207
  216
  224
  233
  242
  252
  262
  272
  283
  295
  307
  320
  333
  347
  363
  378
  395
  413
  432
  451
  472
  494
  517
  541
  567
  594
Cash from operations, $m
  8,288
  9,961
  10,713
  11,497
  12,314
  13,164
  14,048
  14,966
  15,921
  16,913
  17,943
  17,867
  18,982
  20,141
  21,348
  22,605
  23,914
  25,279
  26,702
  28,187
  29,737
  31,356
  33,047
  34,815
  36,664
  38,597
  40,620
  42,737
  44,953
  47,274
  49,706
Maintenance CAPEX, $m
  0
  -1,216
  -1,336
  -1,461
  -1,591
  -1,726
  -1,867
  -2,013
  -2,165
  -2,323
  -2,487
  -2,658
  -2,835
  -3,019
  -3,211
  -3,411
  -3,619
  -3,836
  -4,062
  -4,297
  -4,543
  -4,800
  -5,068
  -5,348
  -5,640
  -5,946
  -6,266
  -6,601
  -6,952
  -7,319
  -7,703
New CAPEX, $m
  -2,198
  -2,236
  -2,317
  -2,415
  -2,515
  -2,616
  -2,720
  -2,827
  -2,938
  -3,053
  -3,173
  -3,299
  -3,431
  -3,569
  -3,715
  -3,869
  -4,031
  -4,202
  -4,382
  -4,572
  -4,773
  -4,985
  -5,208
  -5,444
  -5,692
  -5,954
  -6,229
  -6,520
  -6,826
  -7,149
  -7,488
Cash from investing activities, $m
  -2,783
  -3,452
  -3,653
  -3,876
  -4,106
  -4,342
  -4,587
  -4,840
  -5,103
  -5,376
  -5,660
  -5,957
  -6,266
  -6,588
  -6,926
  -7,280
  -7,650
  -8,038
  -8,444
  -8,869
  -9,316
  -9,785
  -10,276
  -10,792
  -11,332
  -11,900
  -12,495
  -13,121
  -13,778
  -14,468
  -15,191
Free cash flow, $m
  5,505
  6,509
  7,060
  7,621
  8,209
  8,822
  9,461
  10,126
  10,818
  11,537
  12,283
  11,911
  12,716
  13,552
  14,421
  15,325
  16,264
  17,241
  18,258
  19,318
  20,421
  21,572
  22,772
  24,024
  25,331
  26,697
  28,124
  29,615
  31,175
  32,807
  34,514
Issuance/(repayment) of debt, $m
  2,420
  4,707
  4,900
  5,108
  5,319
  5,533
  5,753
  5,979
  6,213
  6,457
  6,711
  6,977
  7,256
  7,549
  7,858
  8,183
  8,525
  8,887
  9,268
  9,670
  10,095
  10,543
  11,015
  11,513
  12,038
  12,592
  13,175
  13,790
  14,437
  15,119
  15,837
Issuance/(repurchase) of shares, $m
  -2,747
  446
  103
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -244
  5,153
  5,003
  5,108
  5,319
  5,533
  5,753
  5,979
  6,213
  6,457
  6,711
  6,977
  7,256
  7,549
  7,858
  8,183
  8,525
  8,887
  9,268
  9,670
  10,095
  10,543
  11,015
  11,513
  12,038
  12,592
  13,175
  13,790
  14,437
  15,119
  15,837
Total cash flow (excl. dividends), $m
  5,154
  11,661
  12,063
  12,729
  13,528
  14,355
  15,214
  16,106
  17,032
  17,994
  18,995
  18,888
  19,972
  21,102
  22,279
  23,508
  24,790
  26,128
  27,527
  28,988
  30,516
  32,114
  33,787
  35,537
  37,370
  39,289
  41,299
  43,405
  45,612
  47,926
  50,351
Retained Cash Flow (-), $m
  522
  -4,994
  -5,287
  -5,512
  -5,739
  -5,970
  -6,207
  -6,452
  -6,704
  -6,967
  -7,241
  -7,528
  -7,829
  -8,146
  -8,479
  -8,829
  -9,199
  -9,589
  -10,000
  -10,434
  -10,892
  -11,376
  -11,885
  -12,423
  -12,989
  -13,587
  -14,216
  -14,879
  -15,578
  -16,314
  -17,088
Prev. year cash balance distribution, $m
 
  9,012
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  15,679
  6,776
  7,218
  7,788
  8,385
  9,007
  9,654
  10,327
  11,027
  11,753
  11,359
  12,143
  12,956
  13,801
  14,678
  15,591
  16,539
  17,526
  18,554
  19,624
  20,739
  21,902
  23,114
  24,380
  25,702
  27,083
  28,526
  30,034
  31,612
  33,263
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  15,033
  6,203
  6,281
  6,413
  6,499
  6,536
  6,522
  6,455
  6,334
  6,162
  5,394
  5,182
  4,926
  4,633
  4,309
  3,962
  3,599
  3,228
  2,857
  2,494
  2,145
  1,817
  1,515
  1,242
  1,000
  790
  612
  465
  345
  250
Current shareholders' claim on cash, %
  100
  99.6
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5
  99.5

Sanofi is a healthcare company, focused on patient needs and engaged in the research, development, manufacture and marketing of therapeutic solutions. The Company's segments are Pharmaceuticals, Human Vaccines (Vaccines), and Other. The Pharmaceuticals segment comprises the commercial operations of various franchises, including Speciality Care (Rare Diseases, Multiple Sclerosis, and Oncology), Diabetes and Cardiovascular, Established Prescription Products, Consumer Healthcare and Generics, and research and development, production and marketing activities for all of the Company's pharmaceuticals operations. The Vaccines segment is dedicated to vaccines and includes the commercial operations of the Company's vaccines division Sanofi Pasteur and dedicated research and development, production and marketing activities for the Company's vaccines operations. Its Rare Diseases products include Cerezyme, Cerdelga, Myozyme and Lumizyme, Fabrazyme, and Aldurazyme.

FINANCIAL RATIOS  of  Sanofi ADR (SNY)

Valuation Ratios
P/E Ratio 12.7
Price to Sales 1.7
Price to Book 1
Price to Tangible Book
Price to Cash Flow 7.6
Price to Free Cash Flow 10.4
Growth Rates
Sales Growth Rate -0.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -24.9%
Cap. Spend. - 3 Yr. Gr. Rate 9.8%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 29.2%
Total Debt to Equity 32.3%
Interest Coverage 15
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 5.4%
Return On Total Capital 6.2%
Ret/ On T. Cap. - 3 Yr. Avg. 6.1%
Return On Equity 8.1%
Return On Equity - 3 Yr. Avg. 7.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 69.2%
Gross Margin - 3 Yr. Avg. 68.6%
EBITDA Margin 27%
EBITDA Margin - 3 Yr. Avg. 30.3%
Operating Margin 17.4%
Oper. Margin - 3 Yr. Avg. 17.4%
Pre-Tax Margin 16.4%
Pre-Tax Margin - 3 Yr. Avg. 16.4%
Net Profit Margin 13.6%
Net Profit Margin - 3 Yr. Avg. 13.2%
Effective Tax Rate 23.4%
Eff/ Tax Rate - 3 Yr. Avg. 19.5%
Payout Ratio 79.8%

SNY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SNY stock intrinsic value calculation we used $36632 million for the last fiscal year's total revenue generated by Sanofi ADR. The default revenue input number comes from 2016 income statement of Sanofi ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our SNY stock valuation model: a) initial revenue growth rate of 9.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for SNY is calculated based on our internal credit rating of Sanofi ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Sanofi ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of SNY stock the variable cost ratio is equal to 84%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for SNY stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Sanofi ADR.

Corporate tax rate of 27% is the nominal tax rate for Sanofi ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the SNY stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for SNY are equal to 61.8%.

Life of production assets of 18.6 years is the average useful life of capital assets used in Sanofi ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for SNY is equal to 4.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $60744 million for Sanofi ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 2533.02 million for Sanofi ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Sanofi ADR at the current share price and the inputted number of shares is $125.7 billion.

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COMPANY NEWS

▶ Sanofi Stock: Performance in 3Q17   [Oct-20-17 02:39PM  Market Realist]
▶ Regeneron-Sanofi drug succeeds mid-stage study   [Oct-17-17 12:58PM  Reuters]
▶ Flexion's Latest FDA Approval Reignites Takeover Chatter   [Oct-15-17 05:00PM  TheStreet.com]
▶ Specialty Segment Drives Sanofis Revenue Growth in 2017   [Oct-13-17 06:06PM  Market Realist]
▶ Dow's Merck Bails On Cholesterol Drug, Prodding Shares Down   [Oct-11-17 05:58PM  Investor's Business Daily]
▶ This Biotech Hit Record High; Could Undercut Regeneron In Eczema   [Oct-10-17 04:57PM  Investor's Business Daily]
▶ 3 High-Yield Healthcare Stocks   [Oct-08-17 09:00AM  Motley Fool]
▶ Why Regeneron's Patent Win Is Worse For Amgen Than You Think   [Oct-06-17 05:37PM  Investor's Business Daily]
▶ [$$] Appeals Court Rules Against Amgen in Patent Case   [01:51PM  The Wall Street Journal]
▶ 3 High-Yield International Stocks   [Oct-03-17 03:30PM  Motley Fool]
▶ Ex-Genzyme head Meeker to lead Flagship drug startup KSQ   [07:05AM  American City Business Journals]
▶ 12 Flu Season Facts You Need to Know   [Sep-24-17 10:46AM  Motley Fool]
▶ Alnylam Rockets On Strong Rare-Disease Drug Data; Ionis Tanks   [Sep-20-17 04:07PM  Investor's Business Daily]
▶ Alnylam Notches a Game-Changing RNAi Win   [02:01PM  Motley Fool]
▶ Yahoo Finance Live: Market Movers - Sep 19th, 2017   [Sep-19-17 07:20AM  Yahoo Finance Video]
▶ 5 Top Marijuana Stocks For 2017   [Sep-18-17 07:30PM  Oilprice.com]
▶ Why Lexicon Pharmaceuticals Is Down 11% Today   [Sep-14-17 12:32PM  Motley Fool]
▶ Why Regeneron Is Getting Smoked   [Sep-07-17 10:52AM  Barrons.com]
▶ [$$] Sanofi Stops Work on Two Zika Vaccines   [09:49AM  The Wall Street Journal]
▶ Sanofi Has Good Potential Upside   [08:50AM  TheStreet.com]
▶ 3 International Stocks for Retirees   [Aug-26-17 03:20PM  Motley Fool]
▶ Top 10 Dividend-Paying Stocks Worldwide   [Aug-22-17 04:04PM  Forbes]
▶ One of the 33 Great Minds of Investing   [Aug-21-17 05:59PM  GuruFocus.com]
▶ A Look at Sanofi Pasteurs Performance in 2Q17   [Aug-18-17 10:37AM  Market Realist]
Financial statements of SNY
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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