Veeva Systems (NYSE:) is a cloud-based software as a service (SaaS) company that targets the life sciences industry. This platform allows drug makers to develop and market drugs faster, as well as comply with regulatory requirements.

Veeva has experienced consistent top-line growth over the past decade. With 72.1% gross margins growing to 25.8% and 32.7% revenue growth, 2021 saw Veeva’s top-line grow by 32.7%.

It trades at 114.6 times earnings, however. We continue our approach to October, which is historically volatile for the stock markets, and we give Veeva Systems a neutral rating because of its high multiple that could make it more vulnerable to unintentional drawdowns. TipRanks has Veeva stock charts.

What We Like

There are a couple of things that are very interesting about Veeva. First, Veeva’s vertical integration is very important for the life-sciences industry. Because this industry is complex and tightly regulated, platforms that are horizontally integrated (generally used across many industries) often cannot be used by themselves.

Therefore, pharmaceutical companies would have to either mix and match platforms or make their own. Veeva is now the main provider in this complicated industry.

Another interesting aspect is the way that Veeva integrates research and sales. The platform allows companies to organize internal processes and documents related to drug development, making it easier to collaborate between different departments.

Salespeople can easily find the internal documentation that shows efficacy or other pertinent trial results, and they are available to them for easy access. It makes it easier for the sales staff.

Growth Catalysts

Veeva operates in the healthcare IT industry which is expected to grow at a CAGR of 10.7% from 2021 to 2028. For an industry worth $74.2 million, this is considered high growth. The company’s increasing dependence on software and data is clearly a tailwind.

Veeva’s platform has a specialized industry that makes it expensive to switch. Veeva customers might not consider switching to a rival platform if they see a comparable competitor. This is because Veeva has a lot of data.

Additionally, the platform would require employees to learn new features, which could lead to lower productivity.

Risks

A potential long-term risk that we see in Veeva is that by continuing to specialize in a very specific niche within the healthcare IT industry, it may be limiting its potential for growth.

The company is profitable and has the potential to grow into other industries.

There is always the possibility of competitors. Veeva has an excellent market position, but it needs to continue to innovate to keep ahead of its competitors.

We mentioned that customers might not be willing to move to similar companies. Customers will most likely move to companies that are significantly more successful.

Wall Street’s Take

Turning to Wall Street, Veeva has a Moderate Buy consensus rating, based on eight Buys, two Holds and zero Sells assigned in the last three months. Veeva’s average price target is $350.13, which implies an upside potential of 14.7%.

Final Thoughts

Veeva is a great company. Its current multiple, even if it is justified by investors, makes it susceptible to drawdowns during volatile periods. These have historically occurred around this time every year.

Stock Bros Research had no position at the time this article was published.

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