Veeva Systems (NYSE:VEEV) just released its Q2 numbers and they were very good. The thing is, VEEV stock didn’t really respond to its blowout earnings, revenue, and upbeat guidance.
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Why? Well, some of it has to do with the fact that VEEV stock is up 84% year to date. Analysts have been bullish on the niche cloud solutions provider for a while, so this great news didn’t come from out of the blue.
The stock is up over 1% today, but you need to bear in mind that VEEV stock is sporting a trailing PE of 89, so it’s right in line with analysts’ expectations. On the other hand, those expectations are high because VEEV has come to dominate a very important market sector.
Demand Boosts VEEV Stock
Basically, Veeva Systems has cloud-based software solutions for pharmaceutical, life sciences, and research companies that manage drug trials, research, as well as sales and distribution information. That includes content management systems that allow varied access of the sales side to the R&D side.
Being able to share this highly proprietary data across an organization in a secure and efficient way is crucial. And building cloud-based systems specifically for the unique needs of this sector has allowed VEEV to build a groundswell of demand for its products.
Remember that big pharmaceutical companies used to be vertically integrated behemoths, with massive internal structures. But increasingly, they have spun off divisions to companies that specifically focus on drug trials, product development, or manufacturing.
All this subdivisions and subcontractors mean communications have become evermore important. And visibility is essential.
According to a study by Johns Hopkins Bloomberg School of Public Health, drug trials alone cost about $19 million. But according to a study by Tufts Center for the Study of Drug Development, the total cost of getting a drug to market, including R&D, production, marketing, etc, is around $2.6 billion.
That’s why it’s crucial for companies to manage their resources wisely. And one of the keys to that is having real time information at their fingertips.
Resilient Healthcare Sector Solidifies VEEV Stock
Another point to bear in mind here is that VEEV stock isn’t really affected by the bigger global issues that are tugging on other stocks right now. The trade war with China and the Brexit furor don’t really change its growth path.
The only thing that may change its trajectory would be a significant global slowdown or U.S. recession. But even then, healthcare is one of the more resilient sectors, especially as the populations of major industrialized countries are getting older and relying on more medications to boost the quality of their older citizens.
What’s more, animal medicines are also in great demand. For example, the African Swine Flu is having a major effect on pork production in Europe and Asia. Drug therapies to stem this quickly rising tide of infections is vital to these economies.
It’s no surprise then that VEEV stock remains an A-rated stock in my Portfolio Grader.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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