Over the past six months, Veeva Systems has been a great trade, beating the S&P 500 by 6.9%. Its stock price has climbed to $297.36, representing a healthy 23.3% increase. This was partly due 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 are investors being too optimistic? Find out in our full research report, it’s free for active Edge members.

Why Does VEEV Stock Spark Debate?

Originally named "Verticals onDemand" before rebranding in 2009, Veeva Systems (NYSE: VEEV) provides cloud software, data solutions, and consulting services that help life sciences companies develop and bring products to market more efficiently.

Two Positive Attributes:

1. Customer Acquisition Costs Are Recovered in Record Time

The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

Veeva Systems is extremely efficient at acquiring new customers, and its CAC payback period checked in at 14.8 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.

2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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 44.7% over the last year.

One Reason to be Careful:

Weak Billings Point to Soft Demand

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 came in at $648.6 million in Q2, and over the last four quarters, its year-on-year growth averaged 14.7%. This performance slightly lagged the sector and suggests that increasing competition is causing challenges in acquiring/retaining customers.

Final Judgment

Veeva Systems has huge potential even though it has some open questions, and with its shares beating the market recently, the stock trades at 15.1× forward price-to-sales (or $297.36 per share). Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.

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