DCF Studio

    VEEV · NYQ · Healthcare

    Veeva Systems Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 106.05

    Market price

    USD 260.21

    Implied upside

    -59.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages just 0.00% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.34% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Current EV/EBITDA of 37.4x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 106.05-59.2%
    Exit multiple
    USD 177.24-31.9%
    Market price
    USD 260.21

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 3.6bnUSD 4.2bnUSD 4.7bnUSD 5.4bnUSD 6.2bn+14.0%
    EBITUSD 850.0mUSD 969.3mUSD 1.1bnUSD 1.3bnUSD 1.4bn+14.0%
    NOPATUSD 710.1mUSD 809.7mUSD 923.4mUSD 1.1bnUSD 1.2bn+14.0%
    Add depreciation & amortisationUSD 48.8mUSD 55.6mUSD 63.4mUSD 72.3mUSD 82.5m+14.0%
    Less capital expenditureUSD -48.8mUSD -55.6mUSD -63.4mUSD -72.3mUSD -82.5m+14.0%
    Less increase in working capitalUSD 8.9mUSD 10.2mUSD 11.6mUSD 13.2mUSD 15.1m-14.0%
    Free cashflow to firmUSD 719.0mUSD 819.9mUSD 935.0mUSD 1.1bnUSD 1.2bn+14.0%
    Discount factor0.95180.86220.78100.70750.6409-
    Present valueUSD 684.4mUSD 706.9mUSD 730.2mUSD 754.3mUSD 779.1m+3.3%
    Present Value Of The ForecastUSD 3.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.983Reported 0.974, pulled toward 1.0 (Blume)
    Cost of equity10.40%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 42.1bn99.8% of capital
    Total debtUSD 95.9m0.2% of capital, book value as a proxy
    Tax rate16.5%Effective, capped at statutory
    WACC10.39%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 106.05

    67% of EV

    Forecast FCFF, final year
    USD 1.2bn
    Capex at depreciation, working capital in reinvestment
    USD 1.2bn
    Less reinvestment at g/ROIC (24.1% of NOPAT)
    USD -288.8m
    Capitalised
    USD 911.8m
    ROIC (WACC floor)
    10.4%
    Terminal value, undiscounted
    USD 11.8bn
    Terminal value, discounted
    USD 7.6bn
    Enterprise value
    USD 11.2bn
    Less net debt
    USD -6.5bn
    Equity value
    USD 17.7bn

    Exit at 20.0x EBITDA

    Value per shareUSD 177.24

    84% of EV

    Terminal value, undiscounted
    USD 30.4bn
    Terminal value, discounted
    USD 19.5bn
    Enterprise value
    USD 23.1bn
    Less net debt
    USD -6.5bn
    Equity value
    USD 29.6bn

    Spread between methods: 50%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.39%124.41125.70127.17128.87130.87
    9.39%113.70114.26114.86115.52116.26
    10.39%105.60105.83106.05106.27106.49
    11.39%99.5299.7299.91100.11100.30
    12.39%94.4394.6094.7894.9595.12

    Outlined: this model. Green text: above today's price of 260.21. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year14.0%48.1%+34.1pp
    EBIT margin23.3%77.0%+53.6pp
    Discount rate10.4%4.8%-5.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.