Veeva Systems Inc. ( VEEV Quick Quote VEEV - Free Report) has been riding on the progress of its cloud-based software and a strong product portfolio. However, dented margins are a concern.
The company, with a market capitalization of $41.24 billion, is a leading provider of cloud-based software applications and data solutions for the life sciences industry. Its earnings are expected to improve 15.4% over the next five years. Also, this presently Zacks Rank #3 (Hold) company delivered a trailing four-quarter earnings surprise of 7.1%, on average.
Over the past three months, the stock has declined 4% against 17.1% growth of its
Let’s delve deeper into the factors working in favor of the company.
Focus on Cloud-Based Software: In the third quarter of fiscal 2021, the company added 19 CRM customers, its biggest quarterly increase yet. It continues to grow its market share and made multiple CRM expansions within its existing customer base. It also progressed well in its newer domains including Data Cloud, MyVeeva for Doctors and Veeva Link.
In October 2020, management announced the development of the company’s Veeva Clinical Network solution-based first two applications, namely Veeva Site Connect and Veeva eConsent. Notably, the company claims Veeva Clinical Network to be the industry’s only solution for paperless, patient-centric trials. This development is expected to boost Veeva’s portfolio of cloud-based offerings for the life sciences industry.
Solid Product Portfolio: Veeva Systems’ unique solutions include Veeva Vault, Veeva CRM, Veeva Network and Veeva OpenData.The company expects Vault to continue with its strong growth momentum, particularly Development Cloud with progress across the board in Clinical, Quality and Regulatory segments.
In the fiscal third quarter, 20 net new customers selected Vault QualityDocs and the company now has 12 of the top 20 pharmas, which are QualityDocs customers.The company is also making good progress on the clinical data side. For fiscal 2021, Vault subscription revenues are expected at $577 million.
What’s Deterring the Stock’s Prospects? Escalating Costs and Depressed Margins: High expenses on the operational side raise concerns. In the fiscal third quarter, gross margin was 72.7%, which contracted 118 basis points (bps) while adjusted operating margin fell 193 bps to 26.8%. Estimate Trend
The Zacks Consensus Estimate for fiscal 2021 revenues is pegged at $1.45 billion, suggesting a 31.2% rise from the year-ago reported number. The same for fiscal 2021 earnings per share stands at $1.95, suggesting a 20.1% rise from the year-ago reported number.
Some better-ranked stocks from the broader medical space are
McKesson Corporation ( MCK Quick Quote MCK - Free Report) , DaVita Inc ( DVA Quick Quote DVA - Free Report) and IDEXX Laboratories ( IDXX Quick Quote IDXX - Free Report) ,each carrying a Zacks Rank #2 (Buy), presently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
McKesson has a projected long-term earnings growth rate of 6.6%.
DaVita has a projected long-term earnings growth rate of 18.3%.
IDEXX has an estimated long-term earnings growth rate of 15.8%.
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