Veeva Systems Inc. (NYSE:VEEV): Financial Strength Analysis
With a market capitalization of US$20b, Veeva Systems Inc. (NYSE:VEEV) is a large-cap stock, which is considered by most investors as a safe bet. Common characteristics for these big stocks are their strong balance sheet and high market liquidity, which means there's plenty of stocks available to the public for trading. These companies are resilient in times of low liquidity and are not as strongly impacted by interest rate hikes as companies with lots of debt. Using the most recent data for VEEV, I will determine its financial status based on its solvency and liquidity, and assess whether the stock is a safe investment.
Check out our latest analysis for Veeva Systems
Does VEEV face the risk of succumbing to its debt-load?
Debt-to-equity ratio standards differ between industries, as some are more capital-intensive than others, meaning they need more capital to carry out core operations. As a rule of thumb, a financially healthy large-cap should have a ratio less than 40%. For VEEV, the debt-to-equity ratio is zero, meaning that the company has no debt. It has been operating its business with zero debt and utilising only its equity capital. Investors' risk associated with debt is virtually non-existent with VEEV, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can VEEV meet its short-term obligations with the cash in hand?
Given zero long-term debt on its balance sheet, Veeva Systems has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. At the current liabilities level of US$401m, it seems that the business has been able to meet these obligations given the level of current assets of US$1.4b, with a current ratio of 3.57x. The current ratio is calculated by dividing current assets by current liabilities. Having said that, a ratio above 3x may be considered excessive by some investors, yet this is not usually a major negative for a company.
Next Steps:
VEEV has no debt in addition to ample cash to cover its near-term commitments. Its strong balance sheet reduces risk for the company and shareholders. Keep in mind I haven't considered other factors such as how VEEV has performed in the past. You should continue to research Veeva Systems to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for VEEV’s future growth? Take a look at our free research report of analyst consensus for VEEV’s outlook.
Valuation: What is VEEV worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether VEEV is currently mispriced by the market.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
