SNY: Sanofi Aventis

Date: 10 March 2009
Price: $25.82
P/E: 9.25
FP/E: 6.2
P/B: 1.7
Yield: 6%
Debt/Eq: 0.08

Company Description
A French pharmaceutical company with an array of products. Top selling drug makes up 9% of sales, so they're not totally dependent on a single drug for their success.

Past 10 years
The financial history looks pretty encouraging. Sales have increased steadily, with a large bump in 2004 when they purchased another company. Book value has increased rapidly over the same period.

Earnings have been slightly less consistent, but still encouraging. Basically they rose from $0.43/share to $1.86/share between 1999 and 2003. Then the acquisition happened in 2004, and there was a $2.66/share loss. Then again we have consistent (and faster) growth from 2005 onwards, with EPS rising from $0.99 to $3.02, with an estimate of approximately $4/share for 2009.

Pros
Unlike most companies I've been looking at, SNY are actually expected to increase earnings quite significantly next year, giving a FP/E of around 6. It's also good to have some diversity in the portfolio, and certainly a European pharmaceutical company would give that. Basically that's it: they're cheap, growing, and different. That'll work.

Cons
It could be cheaper - some of the other companies we're looking at have P/Es as low as 4.x. They've made a bid to acquire Zentiva (an eastern European generic pharmaceutical company for $2.6B. Acquisitions are generally bad as there's plenty of scope for stuff to go wrong, but I'm not too worried about this as the acquisition is fairly small (net earnings for 2008 were $8B, so the acquisition can be made out of free cash flow).

Conclusion
Yes - I'd like to buy some stock in this company. Fairly strong buy.