Veeva Systems Inc (NYSE:VEEV) has experienced a daily gain of 2.14% and a 3-month gain of 4.5%. With an EPS of 3.32, investors might wonder if the stock is modestly undervalued. This article aims to provide a comprehensive analysis of Veeva Systems’ valuation to determine its intrinsic value.
Veeva Systems is a global leader in cloud-based software solutions for the life sciences industry. It caters to a wide range of clients, from emerging biotechnology companies to global pharmaceutical manufacturers. The company’s offerings, such as Veeva CRM and Veeva Vault, address operating and regulatory requirements, improving the efficiency and compliance of the life sciences industry.
At a stock price of $205.72, Veeva Systems has a market cap of $33.10 billion. The company’s GF Value, which is an estimation of its intrinsic value, stands at $266.18. This suggests that the stock may be modestly undervalued.
The GF Value takes into account historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If a stock price is significantly above the GF Value Line, it is overvalued, while a price significantly below the line indicates undervaluation.
Veeva Systems’ relatively undervalued status suggests that its long-term return is likely to be higher than its business growth.
When evaluating the financial strength of a company, investors should consider its cash-to-debt ratio and interest coverage. Veeva Systems has a cash-to-debt ratio of 66.13, which ranks better than 88.62% of companies in the Healthcare Providers & Services industry. Overall, it is financially strong.
Profitability and growth are important factors to consider in valuation. Veeva Systems has been consistently profitable over the past 10 years, with a revenue of $2.20 billion and an EPS of $3.32 in the past twelve months. Its operating margin of 17.74% ranks better than 86.56% of its industry peers. The company has also demonstrated strong growth, with a 3-year average annual revenue growth rate of 23.9%.
Return on invested capital (ROIC) compared to the weighted cost of capital (WACC) is another measure of profitability. Veeva Systems has an ROIC of 26.14, higher than its WACC of 10.7, indicating that it is creating value for shareholders.
In conclusion, Veeva Systems appears to be modestly undervalued. The company’s financial strength is solid, and its profitability and growth rank favorably among its industry peers. However, it is important to conduct further research and consider individual investment objectives before making any investment decisions.
Definitions:
– Earnings Per Share (EPS): A financial metric that indicates the portion of a company’s profit allocated to each outstanding share of common stock.
– Intrinsic Value: The estimated true value of a company or asset based on its fundamental characteristics rather than its market price.
– Market Cap: The total market value of a company’s outstanding shares of stock.
– Cash-to-Debt Ratio: A measure of a company’s ability to pay off its debt using its available cash.
– Interest Coverage: A measure of a company’s ability to meet its interest payments on outstanding debt.
– Profit Margin: The percentage of revenue that remains as profit after deducting expenses.
– Revenue: The total income generated by a company’s business activities.
– ROIC: Return on Invested Capital, a measure of how effectively a company generates cash flow relative to the capital invested in its business.
– WACC: Weighted Average Cost of Capital, the rate a company is expected to pay to finance its assets.
Sources:
– GuruFocus: https://www.gurufocus.com/news/1414068/veeva-systems-veev-a-hidden-gem-in-the-market