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Veeva: A Rare Breed

May 06, 2020 3:19 PM ETVeeva Systems Inc. (VEEV)ROKU, SHOP, TTD, SHOP:CA23 Comments
Ishan Puri profile picture
Ishan Puri


  • Veeva offers a unique combination of growth and profitability.
  • Given its healthcare focus, the stock has been resilient in the covid crisis.
  • After conducting a series of valuation tests, I conclude that it is priced near fair value.
  • It is an attractive name to build a defensive position in equities today, and to add significantly on pull backs.


As a defensive investment in equities, my valuation shows that it is a decent time to start a position with a long-term outlook. I believe the combination of earnings power, runway for top line growth, and segment focus make it a good choice for long-term investors.

Partner Resource-Hub | Veeva

Source: Veeva website

Earnings Power

Veeva has demonstrated consistent earnings power and top-line growth at scale. Here is a historical view of this:

Source: Rocket Financial

Consistent 25% revenue growth coupled with a strong 20%+ net income margin (GAAP) is impressive. I have been searching for companies like this for a long-time, and there are less than a handful that can meet this financial profile.

Understandably, the stock has remained expensive, with its EV/Sales ratio slowly creeping up in the past few years. At 25x EV/LTM Sales it is not cheap, but it is also a rare company.

Source: Koyfin

Rarely in the company's history has there been a big spread between analyst price target and the actual stock. This is true of many great growth stocks like Shopify (SHOP), Roku (ROKU), and Trade Desk (TTD). All of these names are upgraded after the run-up routinely, and the stock keeps catching up.

Source: Koyfin

Growth Runway

Investors' biggest worry is runway for growth. They believe that Veeva has saturated its core market in pharma and will face pricing pressure from cheaper alternatives in the market.

Recent research from William Blair shows this is not true with channel checks. As you can see below from a recent study, Veeva is viewed as best in breed in an increasing fashion across its product line.

Source: William Blair research

The strength in these ratings is greater awareness among smaller pharma/biotech companies. Veeva is now moving downstream and capturing market share without significantly increased sales and marketing. This is

This article was written by

Ishan Puri profile picture
Focused on fundamentals, pricing power, and competitive moats. I like founder-led teams. Looking for the next generation of great businesses, and always open to debating ideas with others.

Analyst’s Disclosure: I am/we are long VEEV. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (23)

Nice one. Following this; need to pull the trigger. Who are VEEV’s competitors?
Ishan Puri profile picture
IQVIA and a few others. Veeva is the premium player (most expensive and most feature rich)
fhbecker profile picture
What happens when their deal with CRM ends?
It gets renewed bit also Vault is then over 50% taking them into the 3 new major verticals of chemicals, cosmetics and consumer products goods. If you look at most recent summits there are also 2-3 other verticals where Vault and Nitro lead the charge
Ishan Puri profile picture
Yes that's right. The growth is in the new verticals
I went long, 100 shares at 130. I could not find any competition, good moat imo.
what's the expiration?
Very good article. The comparison with other 'blue chips' is most illuminating.
Niksurfs profile picture
Well stated article.

While it is expensive, as always it is a matter of your personal objectives, investment timelines as well as tolerance for volatility. If you have a longer term time horizon of 12 months or longer, you will be greatly rewarded, it is an absolute stand out as a company. Great vision, strategic insight, product development, marketing and excellent management, execution is crisp and effective.

That said, nothing and no one is perfect, so when subjective and overly elevated expectations by investors and hedge funds get ahead of themselves at times, it will create some air pockets.

A longer term investor, vs timing a trade in VEEV you will have to be patient and prepared for turbulence from time to time. I have and continued to add over the past few years, very happy I have and this company has never been a disappointment.

When the IQVIA lawsuit is settled (IMO in VEEV's favor, its a no brainer) VEEV will see another major tailwind. Right now its doing an amazing job with acquisitions and organic growth and the current environment in Pharma and the level of communications and pace of development is going to be a headline item for them on the next conference call.
Ishan Puri profile picture
Great points here, and something I constantly remind readers. The market as a whole is expensive now and this name is too. I am waiting for big adds soon. Having a prepared mind helps.

Good color on IQVIA lawsuit.
Niksurfs profile picture
Thank you @Ishan Puri for your kind comment.

Investor30 - to answer your question re: how to establish your position, look for a pullback (perhaps this week) should be slight but then you might go in at 30-35% of your goal/objective position.
Then add on weakness going forward when you find it. the market is almost a little euphoric right now and it has climbed quickly, there will be some giveback. Be patient, be long and look for opportunity over time, they will present themselves.

I think the earning call and specially the Con Call with analysts is going to be a rocker event. There is a lot of good news here... just be patient, this has a long way to go, IMO

Option Generator profile picture
Interesting read as with a lot of the articles you’ve performed so far. Long VEEV with covered calls.
I sell covered calls as well. What's your strategy to keep shares, yet still get some income from calls.
Option Generator profile picture
190 calls now May 15. Going to roll out and up to 195 for June.
Take a look at TYL- for its market value the least followed software company. Unique niche, shifting mix to saas and great management. Have upped R&D from $45 to $90 million. Look for major new initiatives including, SAAS, CLOUD (using AWS), mobile, bundles and "Connected Community " effort. See their corporate presentation as starter. Their CFO has been there for past 15 years, is superb and accessible. Maybe another good name to follow and write about. Not crowded coverage.

Regarding VEEV the analysts and investors are MISSING the important early penetration of three new verticals with their Vault and Nitro products. LOOK at their website to see the summit meetings they have had and are having for the chemicals, cosmetics and consumer goods products verticals. All complex with regard to production, quality control and government compliance. Early acceptance at divisions of DuPont and P&G will spread to other divisions and then to peers as these summit highlight success stories.
Ishan Puri profile picture
Very interesting. I love vertical plays with large install bases. They often have earning power which TYL does. I will take a look. I wonder how budgets change with covid
Municipalities do not change budgets quickly. TYL is finding physical meeting more difficult. Municipalities have found that their IT infrastructures are old, can not handle remote work and badly need to upgrade to cloud based. With the high R&D TYL is spending over 24 months and the announced move to AWS for their cloud and increasing SAAS mix 2021-2025 could see higher growth and HIGHER margins. TYL not broadly nor well followed. 50-75% upside maybe over next 24 months.
They buy back stock. Management significant ownership.
Take a look yourself. Excellent corporate presentation.
Ishan Puri profile picture
Great thanks I will check it out
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