Estimating The Intrinsic Value Of Veeva Systems Inc. (NYSE:VEEV)

Veeva Systems Inc. (NYSE: VEEV) is a leading provider of cloud-based software solutions for the life sciences and healthcare industries. As of January 12, 2025, VEEV's stock price is $217.75, and analysts have set an average price target of $256.96, indicating a potential upside of 18.01%. To estimate VEEV's intrinsic value, we can use the Discounted Cash Flow (DCF) analysis, which involves forecasting the company's future free cash flows and discounting them back to their present value.



DCF Analysis for Veeva Systems
To perform a DCF analysis for VEEV, we need to make several assumptions and projections:

1. Future Free Cash Flows (FCF): We'll use the provided revenue and earnings projections to estimate VEEV's future FCF. Based on the given data, we can forecast the following FCF for the next 10 years:
* 2025: $1.06B
* 2026: $1.12B
* 2027: $1.18B
* 2028: $1.22B
* 2029: $1.27B
* 2030: $1.30B
* 2031: $1.34B
2. Growth Rates: We'll use the average growth rates provided by analysts for the next 10 years:
* 2025: 18.01%
* 2026: 12.20%
* 2027: 12.70%
* 2028: 12.70%
* 2029: 12.70%
* 2030: 12.70%
* 2031: 12.70%
3. Discount Rate: We'll use a discount rate of 5.7%, which reflects the risk associated with VEEV's cash flows.
4. Terminal Value: We'll use a terminal growth rate of 2.0% and a terminal value of $36B, which accounts for all future cash flows beyond the initial 10-year period.

Using these assumptions, we can calculate VEEV's intrinsic value as follows:

1. Calculate the present value of each FCF using the discount rate:
* 2025: $845M
* 2026: $848M
* 2027: $842M
* 2028: $829M
* 2029: $810M
* 2030: $789M
* 2031: $766M
2. Sum the present values of all FCF to get the present value of the cash flows (PVCF):
* PVCF = $8.0B
3. Add the terminal value to the PVCF:
* Intrinsic Value = PVCF + Terminal Value = $8.0B + $36B = $44B

Based on this DCF analysis, VEEV's intrinsic value is estimated to be $44B, which is significantly higher than its current market capitalization of $35.4B. This suggests that VEEV may be undervalued at its current stock price.

Analyst Ratings and Price Targets
Analysts have set an average price target of $256.96 for VEEV, which represents a potential upside of 18.01% from its current stock price. The average analyst rating for VEEV is "Buy," indicating that analysts have a generally positive outlook on the company's future prospects. Additionally, the consensus EPS estimate for the next year is $7.05, which is an 8.09% increase from the current EPS of $6.52.



Conclusion
Based on the DCF analysis and the positive outlook from analysts, Veeva Systems Inc. (NYSE: VEEV) appears to be undervalued at its current stock price. The company's strong growth prospects and solid financial performance support the bullish sentiment from analysts. However, investors should always conduct their own due diligence and consider multiple factors before making investment decisions.