Veeva Systems has had an impressive run over the past six months as its shares have beaten the S&P 500 by 15.1%. The stock now trades at $282.13, marking a 20.4% gain. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy VEEV? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Does Veeva Systems Spark Debate?
Built on top of Salesforce as one of the first vertical-focused cloud platforms, Veeva (NYSE:VEEV) provides data and customer relationship management (CRM) software for organizations in the life sciences industry.
Two Positive Attributes:
1. Billings Growth Boosts Cash On Hand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Veeva Systems’s billings punched in at $723.6 million in Q1, and over the last four quarters, its year-on-year growth averaged 15.5%. This performance was solid, indicating robust customer demand. The cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Veeva Systems has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the software sector, averaging an eye-popping 41.5% over the last year.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, Veeva Systems grew its sales at a 14.1% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Veeva Systems. 
Final Judgment
Veeva Systems’s positive characteristics outweigh the negatives, and with its shares topping the market in recent months, the stock trades at 14.8× forward price-to-sales (or $282.13 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than Veeva Systems
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