Consider This Cloud-Based Solutions Provider For Your Portfolio

Sep.16.13 | About: Medidata Solutions, (MDSO)

With a plethora of businesses moving to the cloud, software companies providing SAAS applications on the cloud are expecting better times in the future. Medidata solutions and some of its peers like Oracle (NASDAQ:ORCL), SAP (NYSE:SAP), Tableau software are focusing on cloud enabled software solutions.

Medidata Solutions (NASDAQ:MDSO) an industry leader in EDC (Electronically Captured Data) software and CDMS (Clinical Data Management System) solutions has been performing well as a result of the shift to the cloud. Medidata's clients are mainly from sectors like pharmaceuticals, biotechnology, medical instrumentation devices, academics and government departments.

The company recently declared financial results for the second quarter and they were impressive.

Solid performance

Medidata has registered consecutive organic growth in the past four quarters. In the second quarter as well, revenue of $68.1 million exceeded the consensus estimate of $66.67 million, up 27% from the year ago period.

The increase in the revenue was due to growth in the company's application services which grew 36% from last year.

Medidata experienced an increase of $13.4 million in its gross profit as compared to the year ago quarter. Higher margin application services resulted in an increase in gross margin, which increased to 75% as compared to 71% of the previous year's same quarter.

Earnings per share of $0.36 outperformed analyst estimates of $0.29 which is not a surprise as robust revenue growth and gross margin expansion helped the bottom line.

Business prospects

Medidata has been consistently identifying customers' needs and implementing new features in its existing cloud applications to improve revenue. The cloud model for clinical software is now more efficient in deployment, which can result in considerable cost savings for end customers. With these benefits, it should be able to bring in new customers and get more business from the existing ones.

Its new product release, Medidata Insight, will help it in acquiring new customers since it is the first of its kind quality management solution for industry specific solutions. This further broadens the portfolio of solutions offered by company.

Based on its current growth, the company has raised its revenue expectations for fiscal 2103 to a range of $273 million - $276 million, up from $270 million - $274 million. This will be a growth of 25% -26% as compared to fiscal 2012.

For the next quarter, it targets revenue in the range of $69.5 million-$71 million as against the $70.15 million consensus.

Its policy of staying focused in the area of clinical development software on leading platforms can be undeniably advantageous for its growth in the future. Adapting to the changing environment and technology with time has been the reason behind the success of Medidata. Enabling cloud based solutions as SAAS applications has rewarded Medidata with revenue growth and its ever expanding services should ensure the same.

Some other companies focusing on cloud with SAAS

Tableau Software (NYSE:DATA) is a company which is also focusing on cloud based solutions. It is primarily involved in business intelligence and is partnering with various companies for growth. It has partnered with 1010data with the main objective of providing its customers access of it applications on the 1010data cloud server network for enhancing the performance of the reporting system. the company believes that this partnership will help it meet its customers needs who will be able to analyze critical business trends and patterns spanning billions of transactions, and present results in a matter of minutes.

It is because of these strategic partnerships that Tableau has performed well so far. In its recently disclosed financial report for Q2, revenue grew around 71% to $49.9 million from the year ago quarter as it added 1,500 new customers. The stock jumped more than 11% after the report and the company should perform better in the future on the back of such solid partnerships.

Oracle (ORCL) is a leader in the software industry, and the company's recent release of Oracle 12c and a new version of "Oracle Enterprise Manager 12c", which assist in implementing mission critical applications on private cloud make its portfolio even stronger. These applications reduce 90% of the downtime and result in 75% productivity increase apart from 20% savings in server cost.

Even Oracle has benefited from partnerships with companies like Microsoft, NetSuite, which have benefited its cloud and java users. So important partnerships are the way to go in cloud computing and even Oracle is following the same path.


Medidata has performed very well so far and with its new solutions the bull case is strengthened further. Considering the growth of cloud computing and Medidata's specialization in clinical development should ensure growth in the future. The stock is expensive with a trailing P/E ratio of 106 but the company is expected to grow earnings at a CAGR of 22% in the next five years which makes it worth the premium.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.