Veeva Systems Inc. (NYSE:VEEV) delivers industry specific cloud based solutions including data, software, and services to the global life sciences industry. On March 4, 2014, the company reported fourth quarter earnings of $0.07 per share, which were beat the consensus analysts' estimates by $0.01. The company IPO'd back on 17Oct13 and is down 11.28% and is losing to the S&P 500 (NYSEARCA:SPY), which has gained 8.49% in the same time frame. To make room for the stock I sold half of my position in Illumina (NASDAQ:ILMN) because I was already at a 100% and chose to play with the house's money. I've already purchased a batch of the stock for my growth portfolio and am down 3.11% on the batch. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if right now is a good time to purchase more of the stock for my portfolio.
The company currently trades at a trailing 12-month P/E ratio of 299.73, which is expensively priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 100.83 is currently expensively priced for the future in terms of the right here, right now. The 1-year PEG ratio (8.27), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is expensively priced based on a 1-year EPS growth rate of 36.25%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 36.25%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 27.73%.
On a financial basis, the things I look for in general are the dividend payouts, return on assets, equity and investment. The company does not sport a dividend to speak of but is sporting return on assets, equity and investment values of 5%, 7.4% and 8.7%, respectively, which are all respectable values. In this particular instance, I will forego the dividend aspect of the financials because the stock is in my growth portfolio; and in the growth portfolio a stock does not have to have a dividend.
Looking first at the relative strength index chart [RSI] at the top, I see the stock dropping from overbought territory with a value of 45.95 and downward trajectory. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is below the red line but with downward trajectory with the divergence bars decreasing in height, indicating bearish momentum. As for the stock price itself ($32.97), I'm looking at $34.06 to act as resistance and $30.05 to act as support for a risk/reward ratio which plays out to be -8.86% to 3.31%.
- On 04Mar14 the company reported fourth quarter earnings of $0.07 beating estimates by $0.01 on revenue of $62.8 million which beat estimates by $4.8 million.
- The company announced guidance for the next quarter and year, which met analyst expectations on the earnings front and beat on the revenue estimates front.
So even after topping expectations for the previous quarter and providing strong guidance, the stock has been selling off since reporting earnings. Fundamentally, the company is expensively priced based on 2015 earnings and expensive on future growth potential. Financially, I believe all the returns are safe and sound. On a technical basis, I believe there is some downside to come. Due to the bearish technicals, expensive valuation based on earnings, and expensive valuation with respect to earnings growth I will not be pulling the trigger right now because I believe I can get it at a lower price. Rest assured though, this sell-off in the name will not last long.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!
Disclosure: I am long VEEV, ILMN, SPY. 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.