It's been a great morning session for Veeva Systems investors, who saw their shares rise 18.2% to a price of $289.51 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
Veeva Systems's Valuation Is in Line With Its Sector Averages:
Veeva Systems Inc. provides cloud-based software for the life sciences industry in North America, Europe, the Asia Pacific, the Middle East, Africa, and Latin America. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 30.44 and an average price to book (P/B) ratio of 4.19. In contrast, Veeva Systems has a trailing 12 month P/E ratio of 47.5 and a P/B ratio of 6.46.
P/E rations can be placed into context by dividing them by the firm's expected 5-year EPS growth rate, which gives us its Price to Earnings Growth (PEG) ratio. Veeva Systems's PEG ratio is 1.11, which tells us the company is fairly valued in terms of growth. PEG ratios under 1 are considered an indicator of undervalued growth, but we need to keep in mind that many successful companies with excellent share performance have maintained much higher PEG ratios.
As always, a quantitative approach to a stock should be supplemented with a look at qualitative factors, such as the competence of its management team, quality of its corporate culture, and the wide variety of social and economic factors that can impact the success of its product.
Wider Gross Margins Than the Industry Average of 63.49%:
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $1,465 | $1,851 | $2,155 | $2,364 | $2,747 | $3,195 |
| Gross Margins | 72% | 73% | 72% | 71% | 75% | 76% |
| Net Margins | 26% | 23% | 23% | 22% | 26% | 28% |
| Net Income (M) | $380 | $427 | $488 | $526 | $714 | $909 |
| Net Interest Expense (M) | $16 | $15 | $46 | $134 | $208 | $267 |
| Depreciation & Amort. (M) | $9 | $7 | $6 | $6 | $19 | $14 |
| Diluted Shares (M) | 163 | 162 | 164 | 165 | 169 | 167 |
| Earnings Per Share | $2.36 | $2.63 | $3.0 | $3.22 | $4.32 | $5.44 |
| EPS Growth | n/a | 11.44% | 14.07% | 7.33% | 34.16% | 25.93% |
| Avg. Price | $222.84 | $291.56 | $200.74 | $192.52 | $209.2 | $190.12 |
| P/E Ratio | 88.43 | 104.5 | 63.93 | 58.87 | 47.44 | 34.26 |
| Free Cash Flow (M) | $548 | $762 | $780 | $911 | $1,090 | $1,415 |
| EV / EBITDA | 84.73 | 86.13 | 67.38 | 68.94 | 45.57 | 31.85 |
| Total Debt (M) | $0 | $0 | $0 | $0 | $0 | $0 |
| Net Debt / EBITDA | -2.97 | -1.69 | -1.6 | -2.4 | -2.34 | -1.53 |
| Current Ratio | 4.95 | 4.91 | 5.64 | 6.36 | 7.53 | 4.89 |
Veeva Systems benefits from generally positive cash flows, an excellent current ratio of 4.89, and wider gross margins than its peer group. The company's financial statements show a strong EPS growth trend and healthy leverage levels.
