Veeva Systems Inc. (VEEV) is Attracting Investor Attention: Here is What You Should Know

Zacks

Veeva Systems (VEEV) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.

Shares of this provider of cloud-based software services for the life sciences industry have returned +7.3% over the past month versus the Zacks S&P 500 composite's +3.1% change. The Zacks Internet - Software industry, to which Veeva belongs, has gained 4% over this period. Now the key question is: Where could the stock be headed in the near term?

While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Earnings Estimate Revisions

Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.

We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors' interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

Veeva is expected to post earnings of $1.57 per share for the current quarter, representing a year-over-year change of +17.2%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The consensus earnings estimate of $6.23 for the current fiscal year indicates a year-over-year change of +28.7%. This estimate has remained unchanged over the last 30 days.

For the next fiscal year, the consensus earnings estimate of $6.81 indicates a change of +9.4% from what Veeva is expected to report a year ago. Over the past month, the estimate has changed -0.1%.

With an impressive externally audited track record, our proprietary stock rating tool -- the Zacks Rank -- is a more conclusive indicator of a stock's near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #3 (Hold) for Veeva.

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Projected Revenue Growth

While earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.

For Veeva, the consensus sales estimate for the current quarter of $684.18 million indicates a year-over-year change of +11%. For the current and next fiscal years, $2.71 billion and $3.04 billion estimates indicate +14.6% and +12.1% changes, respectively.

Last Reported Results and Surprise History

Veeva reported revenues of $676.18 million in the last reported quarter, representing a year-over-year change of +14.6%. EPS of $1.62 for the same period compares with $1.21 a year ago.

Compared to the Zacks Consensus Estimate of $667.21 million, the reported revenues represent a surprise of +1.34%. The EPS surprise was +5.88%.

The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates each time over this period.

Valuation

Without considering a stock's valuation, no investment decision can be efficient. In predicting a stock's future price performance, it's crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company's growth prospects.

While comparing the current values of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock's price.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Veeva is graded D on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Conclusion

The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Veeva. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.

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Reasons to Retain Veeva Systems Stock in Your Portfolio Now

Zacks

Veeva Systems Inc. VEEV is well-poised for growth in the coming quarters, courtesy of its strong product portfolio. The optimism, led by a solid second-quarter fiscal 2025 performance and strategic deals, is expected to contribute further. Stiff competition and rising operational costs persist.

This Zacks Rank #3 (Hold) company’s shares have risen 22.9% in the year-to-date period compared with 30.2% growth of the industry. The S&P 500 composite has risen 26.3% during the said time frame.

The renowned provider of cloud-based software applications and data solutions for the life sciences industry has a market capitalization of $38.36 billion. The company projects 24.6% growth for the next five years and expects to maintain its strong performance in the future. It delivered a trailing four-quarter average earnings surprise of 5.41%.

Reasons Favoring VEEV’s Growth

Strong Q2 Results: Veeva Systems’ solid second-quarter fiscal 2025 results buoy optimism. The uptick in the overall top and bottom lines and robust performance by the Subscription services segment during the quarter were impressive. Gross profit improved 20.1% to $505.8 million. The gross margin expanded 340 basis points (bps) to 74.8%.

Robust Product Portfolio: We are optimistic about Veeva Systems’ unique solutions, which include Veeva Vault, Veeva CRM (customer relationship management), Veeva Network and Veeva OpenData.

VEEV continues to expand its product portfolio with new launches. In August, the company reached a milestone on its path to connect sales, marketing, medical, and service to enable true customer centricity with the release of Vault CRM Service Center.

Veeva Systems also added 14 new Vault CRM customers in the fiscal second quarter. The company commented on the latest release of Veeva Site Connect, which is part of the Veeva Clinical Platform. Veeva Site Connect plays a critical role as the industry moves to simplify and standardize site collaboration, and seven of the top 20 biopharmas have already adopted Veeva Site Connect to streamline trials. The company released the latest version of Veeva Site Connect, adding powerful new capabilities and a streamlined site-centric experience to simplify and standardize sponsor-site collaboration.

Also, Veeva Clinical Database (“CDB”), a significant innovation in clinical data, has been selected by seven top 20 biopharmas to reduce manual query work and increase speed and efficiency in trials. In September, VEEV announced the expansion of Veeva Vault QMS, adding new capabilities to manage medtech field actions and product recalls that will enable oversight, timeliness and accuracy throughout the field action process. During the fiscal second quarter, early customers started using the Vault Direct Data API to power artificial intelligence and other use cases that will help retrieve data 100 times faster compared to traditional APIs.

Strategic Deals: We are upbeat about Veeva Systems’ recent few collaborations. In October, the company announced a long-term strategic partnership with Walgreens Boots Alliance to help life sciences companies improve patient outcomes by using VEEV’s Data Cloud and Clinical Platform to connect its extensive network of community locations. In June, the company announced a partnership with Vita Global Sciences that is likely to help the latter improve its clinical data management processes as well as collaborations with key trial stakeholders. The latest adoption of Veeva Vault electronic data capture (EDC), part of the Veeva Clinical Platform, is likely to boost the Veeva Development Cloud business.

In June, Veeva Systems also declared that Hangzhou Tigermed Consulting Co., Ltd. has selected Veeva Vault EDC as its technology foundation for modern EDC.

Factors That May Offset the Gains for VEEV

Stiff Competition: Veeva Systems operates in a highly competitive market. In new sales cycles within the company’s largest product categories, it competes with other cloud-based solutions from providers, such as IQVIA Inc., that make applications geared toward the life sciences industry. VEEV’s Commercial Cloud and Veeva Vault application suites also compete to replace client server-based legacy solutions offered by companies like Oracle, Microsoft Corporation and other smaller application providers.

Rising Costs: VEEV has been incurring huge operating expenses in recent months. Sales and marketing expenses for the second quarter of fiscal 2025 increased 4.7% year over year. Management anticipates a further increase in these expenses throughout fiscal 2025. This is mainly due to employee-related costs as the company expands its workforce to bolster sales and marketing efforts for its product offerings and continue growing its sales capacity across all solutions. In the fiscal second quarter, total operating expenses increased 6.9% year over year.

Estimate Trend

Veeva Systems is witnessing a stable estimate revision trend for fiscal 2025. In the past 60 days, the Zacks Consensus Estimate for earnings has moved north 1 cent to $6.23 per share.

The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is pegged at $684.2 million, indicating an 11% improvement from the year-ago quarter’s reported number. EPS estimate is pinned at $1.57, implying 17.2% improvement year over year.

Veeva Systems Inc. Price

Veeva Systems Inc. price | Veeva Systems Inc. Quote

Key Picks

Some better-ranked stocks from the medical industry are Masimo MASI, AngioDynamics ANGO and Globus Medical GMED.

Masimo, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated growth rate of 10.4% for 2025. MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. You can seethe complete list of today’s Zacks #1 Rank stocks here.

Masimo’s shares have risen 37.2% year to date compared with the industry’s 6.7% growth.

AngioDynamics, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 38.2% for 2025. ANGO’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 31.71%.

AngioDynamics’ shares have lost 8.9% year to date against the industry’s 6.7% growth.

Globus Medical, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 12.7%. GMED’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.1%. Its shares have risen 56.5% year to date compared with the industry’s 6.7% growth.

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Is Veeva (VEEV) a Buy as Wall Street Analysts Look Optimistic?

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Veeva Systems

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The recommendations of Wall Street analysts are often relied on by investors when deciding whether to buy, sell, or hold a stock. Media reports about these brokerage-firm-employed (or sell-side) analysts changing their ratings often affect a stock's price. Do they really matter, though?

Before we discuss the reliability of brokerage recommendations and how to use them to your advantage, let's see what these Wall Street heavyweights think about Veeva Systems (VEEV).

Veeva currently has an average brokerage recommendation (ABR) of 1.85, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 24 brokerage firms. An ABR of 1.85 approximates between Strong Buy and Buy.

Of the 24 recommendations that derive the current ABR, 13 are Strong Buy and three are Buy. Strong Buy and Buy respectively account for 54.2% and 12.5% of all recommendations.

Brokerage Recommendation Trends for VEEV

While the ABR calls for buying Veeva, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.

Do you wonder why? As a result of the vested interest of brokerage firms in a stock they cover, their analysts tend to rate it with a strong positive bias. According to our research, brokerage firms assign five "Strong Buy" recommendations for every "Strong Sell" recommendation.

This means that the interests of these institutions are not always aligned with those of retail investors, giving little insight into the direction of a stock's future price movement. It would therefore be best to use this information to validate your own analysis or a tool that has proven to be highly effective at predicting stock price movements.

With an impressive externally audited track record, our proprietary stock rating tool, the Zacks Rank, which classifies stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), is a reliable indicator of a stock's near -term price performance. So, validating the Zacks Rank with ABR could go a long way in making a profitable investment decision.

ABR Should Not Be Confused With Zacks Rank

In spite of the fact that Zacks Rank and ABR both appear on a scale from 1 to 5, they are two completely different measures.

Broker recommendations are the sole basis for calculating the ABR, which is typically displayed in decimals (such as 1.28). The Zacks Rank, on the other hand, is a quantitative model designed to harness the power of earnings estimate revisions. It is displayed in whole numbers -- 1 to 5.

Analysts employed by brokerage firms have been and continue to be overly optimistic with their recommendations. Since the ratings issued by these analysts are more favorable than their research would support because of the vested interest of their employers, they mislead investors far more often than they guide.

In contrast, the Zacks Rank is driven by earnings estimate revisions. And near-term stock price movements are strongly correlated with trends in earnings estimate revisions, according to empirical research.

Furthermore, the different grades of the Zacks Rank are applied proportionately across all stocks for which brokerage analysts provide earnings estimates for the current year. In other words, at all times, this tool maintains a balance among the five ranks it assigns.

There is also a key difference between the ABR and Zacks Rank when it comes to freshness. When you look at the ABR, it may not be up-to-date. Nonetheless, since brokerage analysts constantly revise their earnings estimates to reflect changing business trends, and their actions get reflected in the Zacks Rank quickly enough, it is always timely in predicting future stock prices.

Is VEEV Worth Investing In?

In terms of earnings estimate revisions for Veeva, the Zacks Consensus Estimate for the current year has remained unchanged over the past month at $6.23.

Analysts' steady views regarding the company's earnings prospects, as indicated by an unchanged consensus estimate, could be a legitimate reason for the stock to perform in line with the broader market in the near term.

The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #3 (Hold) for Veeva. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here

It may therefore be prudent to be a little cautious with the Buy-equivalent ABR for Veeva.

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