It’s hard to predict the future with certainty, but it’s safe to make some assumptions about how things will unfold in the next five or 10 years. For instance, given the general historical trajectory of the stock market, it’s reasonable to say that equities will almost certainly be up from their current levels in the next decade.
So even after last year’s downturn, a bull run will come, perhaps this year, maybe the next. Investors need to stay in the game by buying shares of companies with what it takes to perform well over the long run. Let’s consider one such stock: Veeva Systems (NYSE: VEEV).
Veeva’s mission-critical cloud solutions
All companies have to deal with some legal requirements in their day-to-day activities. For those in the life sciences industry, there are even more regulations. Life sciences companies routinely test brand-new and unproven clinical products or technologies on patients. Without serious regulatory oversight, a lot could go wrong.
Veeva Systems offers a range of cloud-based software services, ranging from data storage to clinical trial management, to help life sciences companies remain legally compliant while bringing their products to market faster and more efficiently.
While there are plenty of companies in the highly competitive cloud industry, one of Veeva’s advantages is that it has focused most of its efforts on crafting solutions that are a fit for one specific industry. It’s like getting an electrician rather than a handyperson to fix an electrical problem in one’s home — clearly, a better choice.
And since it was founded in 2007, Veeva Systems has attracted some of the most prominent companies in its target sector. Veeva’s list of clients includes Merck, Vertex Pharmaceuticals, Novo Nordisk, Novartis, and many more. Overall, Veeva has more than 1,000 clients, a number that has generally grown.
The company’s retention rate for its subscription services typically falls in the low-to-mid-120% range — which is considered excellent. Here, Veeva Systems is showing off its competitive advantage. It isn’t easy to switch from one cloud provider to another after doing business with the first for a while. And doing so also means risking the loss of data, slowing down operations while the shift happens, etc. That’s not something corporations are willing to do unless absolutely necessary.
In other words, Veeva Systems benefits from high switching costs, a powerful competitive advantage that can allow it to remain a leader in its small niche of the cloud industry.
The sky’s the limit for Veeva Systems
Given how important Veeva Systems’ solutions are for its clients, it’s not surprising that the company has been successful and has generally grown its top and bottom lines at a good clip. In its fiscal 2023, ended Jan. 31, Veeva’s revenue increased by 16% year over year to $2.2 billion. The company’s adjusted net income rose 15% to $695.6 million.
There is plenty of fuel left in Veeva’s growth engine, considering its habit of adding new clients and designing newer and better solutions to cater to the needs of its existing customers. The company is nearing its goal of $3 billion in revenue in 2025.
And that won’t be the end of it. Veeva targets an industry that won’t become obsolete anytime soon. There will always be a need for medicines, medical devices, and technologies of the kinds its clients develop. In fact, the demand for these things will likely increase with a growing and aging population. Veeva Systems estimates that its target sector is worth $2 trillion. That will continue growing over time, providing more opportunities to the company.
What does that mean for investors? With equities falling sharply last year, there is a good chance the broader market will perform relatively well this year.
And once a bull run inevitably hits, Veeva Systems is in an excellent position to ride its coattails and deliver solid returns. It’s important to hold Veeva’s shares even when there is a downturn as the company’s prospects extend beyond the next five years, during which we will almost certainly experience a bull market.
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Prosper Junior Bakiny has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Merck, Veeva Systems, and Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk A/s. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
