Formal:
* Sa couleur préférée est le bleu. (This is the most literal translation and sounds very formal.)
Informal:
* Son couleur préférée est le bleu. (Slightly less formal, using "son" instead of "sa".)
* Elle aime beaucoup le bleu. (This means "She likes blue a lot" and is more informal.)
* Le bleu est sa couleur préférée. (This is the most natural way to say it in French.)
All of these translations are grammatically correct and mean the same thing. You can choose the one that best suits the context and the tone you want to convey.