Is Veeva Stock a Buy It Now?
Veeva systems (NYSE: VEEV) is a flashy, high-growth SaaS company disguised as a stuffy old medical compliance company. The company plays a critical role for pharmaceutical companies by accelerating the time from trial to data collection and drug sales. At the same time, Veeva services maintain compliance in a highly complex and ever-changing regulatory environment. Let’s take a closer look.
Flatten the curve
Pharmacy and biotechnology are highly regulated industries. Everything from clinical trials to commercialization and marketing must be documented and approved by the Food and Drug Administration in the United States. Also, each state has its own set of regulations to follow. And that’s just the tip of the iceberg. Pharmaceutical and biotechnology multinationals sometimes have to deal with the regulations of each country where they operate. But wait, it gets worse. The laws and regulations of each state and country change all the time.
If that sounds like an impending migraine, that’s good news for Veeva. The company’s cloud-based solutions help its customers sort through red tape and allow them to focus on the research and development of the drugs and therapies they are creating.
While Veeva’s services are wide-ranging, the company groups them into two broad areas: Veeva Commercial Cloud and Veeva Development Cloud. Veeva Commercial Cloud is a collaboration software suite with many end uses. The suite helps commercial and medical departments record, search and share compliance data globally. It also enables marketing departments to optimize data for patient and healthcare professional media campaigns in a compliant and privacy-respecting manner.
Veeva Development Cloud includes applications for clinical, regulatory, quality, and safety functions. The single platform helps manage clinical trial data, streamline study execution, and manage documents and compliance reports in a single cloud-based platform.
These functions were once convenient and extremely time-consuming. Veeva has streamlined an extraordinary amount of routine yet complex tasks. As a result, users benefit greatly by shortening the time from trial to market and saving money in the process.
Veeva provides a large number of separable features. Sometimes customers start their relationship with Veeva with a few services. Other times, they sign up for many services. Over time, however, pharmaceutical companies see the value provided by Veeva’s services and add additional services.
Since add-on services require minimal costs for Veeva, the company becomes more profitable as it grows its revenue line. For example, Veeva’s operating margin fell from 35.6% in fiscal year 2019 to 41% in fiscal year 2022. Total operating profit increased 147% from 307 million to $759 million over the same period.
Is Veeva stock a buy now?
Veeva sells its solutions on a contractual subscription basis. It also earns revenue from implementation and customer service when it installs new services. Recurring subscription revenue can be a reliable source of business sales and profits. About 80% of total revenue comes from highly profitable subscription revenue.
Veeva’s guidance for fiscal year 2023 ending January 31, 2023 includes revenue between $2.165 billion and $2.175 billion. Additionally, adjusted earnings per share are expected to be around $4.16. The stock is down 11% this year, and based on the company’s earnings-per-share guidance, the stock is trading around a forward P/E ratio of around 53x. It may seem expensive, but it shows that the market is willing to bet that there is a long streak of growth ahead of Veeva. The stock might be more of a bargain than it looks.
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BJ Cook has no position in the stocks mentioned. The Motley Fool fills positions and recommends Veeva Systems. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.