Yahoo Finance Veeva Systems Stock Is Believed To Be Fairly Valued
- By GF Value
The stock of Veeva Systems (NYSE:VEEV, 30-year Financials) gives every indication of being fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $249.37 per share and the market cap of $37.8 billion, Veeva Systems stock is estimated to be fairly valued. GF Value for Veeva Systems is shown in the chart below.
Because Veeva Systems is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 26.6% over the past three years and is estimated to grow 20.14% annually over the next three to five years.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Veeva Systems has a cash-to-debt ratio of 26.36, which is better than 86% of the companies in the industry of Healthcare Providers & Services. The overall financial strength of Veeva Systems is 7 out of 10, which indicates that the financial strength of Veeva Systems is fair. This is the debt and cash of Veeva Systems over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Veeva Systems has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $1.5 billion and earnings of $2.36 a share. Its operating margin is 25.79%, which ranks better than 94% of the companies in the industry of Healthcare Providers & Services. Overall, the profitability of Veeva Systems is ranked 9 out of 10, which indicates strong profitability. This is the revenue and net income of Veeva Systems over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Veeva Systems is 26.6%, which ranks better than 87% of the companies in the industry of Healthcare Providers & Services. The 3-year average EBITDA growth rate is 31.2%, which ranks better than 82% of the companies in the industry of Healthcare Providers & Services.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Veeva Systems's return on invested capital is 29.53, and its cost of capital is 6.17. The historical ROIC vs WACC comparison of Veeva Systems is shown below:
Overall, the stock of Veeva Systems (NYSE:VEEV, 30-year Financials)gives every indication of being fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 82% of the companies in the industry of Healthcare Providers & Services. To learn more about Veeva Systems stock, you can check out its 30-year Financials here. To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener. This article first appeared on GuruFocus.
