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Bull of the Day: Veeva Systems (VEEV)

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Based in Pleasanton, CA, Veeva Systems Inc. (VEEV - Free Report) is a provider of industry-specific, cloud-based software solutions for the life sciences industry. It offers enterprise applications, a multichannel platform, customer relationship management, and content management solutions. Additionally, Veeva offers its solutions to pharmaceutical, animal health, and biotechnology companies.

Better-Than-Expected Q3 Earnings

During the third quarter, earnings of 45 cents per share easily beat the Zacks Consensus Estimate of 38 cents and soared 80% year-over-year.

Revenues of $225 million also surpassed our consensus estimate and jumped 27% from the prior year period. And, operating expenses, which include research & development, sales and marketing, and administrative, grew much slower than revenues at 19%. This helped non-GAAP profit margins expand 900 basis points to 31.3%.

Additionally, free cash flow hit $37 million during Q3, up 19% year-over-year.

As a result, Veeva raised its guidance for the upcoming fourth quarter, and now expects revenues at a midpoint of $226.5 million and non-GAAP earnings of 40 cents per share. This represents growth of 22% and 74%, respectively.

CEO Peter Gassner said in the earnings release that “We executed well across all areas of the business, expanding our leadership with Veeva Commercial Cloud and Veeva Vault. Our focus on innovation and customer success coupled with our consistent execution sets us up for a great finish to the year and establishes a strong foundation for next year and beyond.”

Price Performance

Year-to-date, VEEV stock has gained over 60%. In comparison, the S&P 500 is down about 4%.

Estimates have been rising lately too, pushing the stock towards a Zacks Rank #1 (Strong Buy).

For the current fiscal year, Veeva’s earnings are expected to grow almost 70% year-over-year. The Zacks Consensus Estimate has moved 10 cents higher in the past 60 days from $1.48 to $1.58 cents per share.

Next year looks pretty strong too, and earnings are expected to grow almost 13%; the consensus estimate sits at $1.78 cents per share, with nine upward revisions in the last two months.

Bottom Line

Veeva’s ability to grow its business is undoubtedly impressive, and its unique Software-as-a-Service model and infrastructure is finally reaching the stage where it’s successfully paying off. Though CEO Gassner said it wasn’t an official company forecast, he expects Veeva to generate between $1-1.1 billion next year, which would be huge for cloud company.

For those investors looking for a SaaS stock to add to their portfolio, VEEV should definitely be on the shortlist.

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