Sandoz Group (SWX:SDZ) Looks Fully Valued After Henlius Biosimilar Deal
Sandoz Group (SWX:SDZ) is back in focus after the company agreed a collaboration with Shanghai Henlius Biotech to develop, manufacture and commercialise up to 10 biosimilars, with milestone payments up to US$322 million.
See our latest analysis for Sandoz Group.
The collaboration news arrives as Sandoz Group trades at CHF73.84, with a 30 day share price return of 15.45% and a year to date share price return of 29.05%. Over the past year, total shareholder return of 48.82% indicates that positive momentum has been building.
If this biosimilar push has you considering where other potential growth stories might be taking shape, it may be worth scanning the market for 130 healthcare AI stocks
For Sandoz Group, this sharp rerating could signal growing conviction in the biosimilar pipeline or simply a burst of optimism around the Henlius deal. So how does the current valuation stack up against the underlying business?
Most Popular Narrative: 4% Overvalued
The most followed narrative for Sandoz Group pegs fair value at CHF70.74, which sits slightly below the current CHF73.84 share price and points to a fairly tight valuation gap.
The analysts have a consensus price target of CHF70.74 for Sandoz Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF85.88, and the most bearish reporting a price target of just CHF53.7.
Want to see what is built into those forecasts? The narrative leans on firm earnings growth, richer profit margins and a lower future P/E multiple. You may be curious which specific assumptions pull that fair value together and how they compare with the Henlius story.
Result: Fair Value of CHF70.74 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, you still need to factor in risks such as ongoing price pressure in biosimilars and generics, as well as Sandoz Group’s reliance on partnerships for a large pipeline.
Find out about the key risks to this Sandoz Group narrative.
Another View: Sandoz Group Through a Cash Flow Lens
The analyst narrative frames Sandoz Group as slightly overvalued around CHF73.84 relative to a CHF70.74 target. Our DCF model points in a very different direction. On that approach, the stock is trading about 40% below an estimated cash flow value of CHF122.73. Which yardstick do you trust more?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Sandoz Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 270 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Does the mix of optimism and caution around Sandoz Group match your own view, or does it raise new questions about the story in front of you? Take a moment to weigh the different valuation angles, then look at the 3 key rewards
Looking for more investment ideas beyond Sandoz Group?
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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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