Veeva’s Growth and Strong Healthcare Customer Base Are Worth a Look

Veeva Systems is primarily involved in providing cloud computing services for the life sciences and pharmaceutical industries. We do everything from helping clients manage clinical trials, to preparing regulatory submissions, to commercializing products. Veeva derives most of its revenue from subscriptions to various cloud products, but also from services such as business consulting.

Most major pharmaceutical companies such as Merck, Moderna, Novartis, and GSK use or use Veeva’s services. Also, customers are less likely to come and go due to fluctuations in economic conditions. Healthcare is a defensive (non-cyclical) sector.

Veeva Systems earned approximately $2.2 billion in the fiscal year ended January 31, up 16% year-over-year. Net income increased 14%. Subscription services accounted for the majority of revenue, up 17% year over year. Over the course of about 10 years, the company’s annual revenue has grown 10x and net income 20x, while its stock price has grown about 370%, or almost 18% annually. Meanwhile, the global market for healthcare cloud infrastructure is expected to grow at a compound annual growth rate (CAGR) of 16.7% from 2023 to 2030 by Grand View Research.

Veeva’s sales and price-to-earnings ratio (P/E) are well below their five-year averages, so it’s no surprise long-term investors are paying attention. (The Motley Fool owns his Veeva Systems stock and recommends Veeva Systems.)

ask the fool

From Binghamton DC, NY: What is Umbrella Insurance?

Food responds: It is intended to provide protection beyond the scope and limitations of other insurance policies.

As an example, imagine someone was in a car accident and someone was injured for $800,000. If the auto insurance covers up to $300,000 of that, then the other half of his $500,000 can be covered by a comprehensive policy. Typical insurance covers liability for homes, cars and boats up to $10 million and may also cover legal costs if you are sued.

Fortunately, umbrella insurance tends to be relatively inexpensive. Policies vary, so if you’re interested, just look for what you need.

From MQ in St. George, Utah: If a company does an initial public offering (IPO) and its shares start trading on the stock exchange, does the original owner of the company stop owning the company?

Food responds: not exactly. When a company “goes public” through an IPO, it often sells only a portion of its business to the public.

A simplified example would look like this: The Sternbears (NYSE:GRRRR) owner, with the guidance of an investment bank, determines the company is worth his $200 million. They decided to sell 25% of it to the public through his IPO to raise money to grow faster. They chose to split the company into 10 million shares initially at $20 each for a total of $200 million. Therefore, 2.5 million shares will be sold to the public, leaving the original owners with 75% of the company, or 7.5 million shares. An IPO will generate about $50 million (2.5 million shares x $20), minus investment bank fees (often around 7%).

school of fools

If you’re approaching retirement and wondering how much you can safely pull out of your nest egg each year, you’ve likely come across the famous “4% rule.” It’s very useful, but it has some serious flaws.

The rule is to withdraw 4% of the nest egg in the first year of retirement, with subsequent annual withdrawals adjusted for inflation. So if by retirement he had saved $600,000, in his first year he would take out $24,000. And if inflation averaged 3% that year, the next year he would take out 103% of that amount, or $24,720. Some backtests suggest that following this rule, nest eggs are likely to last at least 30 years.

One of the reasons this rule is problematic is that it doesn’t take into account the economic environment. Inflation in 2022 averaged a staggering 8%. If retirees increase their withdrawals by 8% this year, when the economy isn’t entirely booming and the threat of recession persists, they may be shrinking the nest egg too much. Some people recommend withdrawing less when the economy is down and more when the economy is booming.

There is one more consideration. The rule was devised by testing a portfolio over time with an asset allocation split between stocks and bonds. If your own portfolio were all stocks or bonds, or had different allocations, your results would likely be significantly different.

Also, if the nest egg lasts 30 years, that’s great, but what if you retire at 60 and live to be 96? Retirement spending also varies, suggesting that a more flexible withdrawal strategy may be better. For example, many retirees spend heavily on travel and entertainment early in their golden years, spend less later, and then spend more again later in life because of rising medical costs.

Use the 4% rule as a rough guide. However, consider consulting with your financial advisor or planner to determine the best strategy and withdrawal rate for you.

my stupid investment

From Patricia, Scottsdale, Arizona: The investment I most regretted happened in 2015. At that time, he bought 62,500 shares of a particular cannabis-focused company for $0.0128 a share, or $800 in total. I have been investing in cannabis related companies for some time and they have been doing well. Just as many people made a fortune selling pickaxes and axes during the gold rush, I decided to “support” companies that serve the cannabis industry with software, financial services, lighting, soil, fertilizer, etc. focused.

I invested in penny stocks because I had a pleasant conversation about marijuana vending machines after meeting with two company presidents at the gym. After the purchase, everything went downhill. The stock recently priced at about $0.001 per share.

The Fool answers: As you discovered, penny stocks (stocks that sell for less than about $5 per share) are notoriously risky.

Your purchase was in 2015, after the company performed a reverse split of 1:1,000 and before it performed a reverse split of 1:500. So your 62,500 shares of him become 125 shares (recently worth less than 13 cents in total). A reverse split is a red flag, as it is usually done by companies in distress.

Another red flag was the questionable verdict. Management planned to buy an entire small California town for $5 million and turn it into a marijuana tourism center, but later sold it. The company has also changed its name several times. Stay away from penny stocks!

Who am I?

My roots go back to 1976 when I opened a small business store called Price Club in San Diego. It was then opened to other members and became the forerunner of the Warehouse Club. Meanwhile, another company (my current name) opened its first warehouse store in Seattle in 1983 and grew revenue from zero to $3 billion in just six years. The two companies merged in 1993 and I was born. Today, its recent market value exceeds his $220 billion, boasting approximately 850 warehouses and over 300,000 employees worldwide. Who am I?

Remember last week’s trivia question? Find it here.

Last week’s trivia answers: McDonald’s

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