Which stock of cloud-based software solutions is a better choice?
Veeva Systems Inc. (VEEV) and AppFolio, Inc. (APPF) are two budding players in the cloud-based software industry. VEEV, in Pleasanton, Calif., Provides cloud-based software solutions for the global life science industry. The company offers enterprise applications, multi-channel platforms, customer relations and content management solutions. APPF, based in Goleta, Calif., Provides cloud-based enterprise software solutions, industry-specific data services and analytics for small and medium-sized businesses (SMBs) in the property management industries and law.
The growing adoption of secure cloud-based software solutions across multiple industries to deliver efficient services to their customers and make it easier to continue working remotely amid resurgent COVID-19 cases is expected to drive industry growth cloud-based software. The global cloud computing market is expected to grow at a 19.1% CAGR to $ 1.25 trillion by 2028. So SNOW and VEEV are expected to benefit.
While the APPF has fallen 31.2% in price since the start of the year, VEEV has jumped 12%. VEEV is a clear winner with price gains of 2.4% over negative APPF returns in terms of performance over the past three months. But which of these titles is the best choice now? Let’s find out.
Click here to view our 2021 Cloud Computing Industry Report
Recent financial results
For its fiscal second quarter, ended July 31, 2021, VEEV’s total revenue increased 28.8% year-on-year to $ 455.59 million. The company’s non-GAAP gross profit was $ 345.42 million, up 29.5% from the prior year period.
VEEV’s non-GAAP operating profit was $ 191.59 million for the quarter, an increase of 32.7% from the prior year period. While its non-GAAP net income increased 31.2% year-over-year to $ 152.67 million, its non-GAAP EPS increased 30.6% to $ 0.94. As of July 31, 2021, the company had $ 1.06 billion in cash and cash equivalents.
For its fiscal second quarter, ended June 30, 2021, APPF revenue increased 9.9% year-over-year to $ 89.04 million. The company’s operating loss was $ 1.15 million, down 81.9% from the previous year. However, APPF’s net profit amounted to $ 2.02 million, down 89.5% from the previous year period. Its loss per share fell 88.9% year-on-year to $ 0.06. The company had $ 48.61 million in cash and cash equivalents as of June 30, 2021.
Past and expected financial performance
VEEV’s EBITDA and leveraged free cash flow have grown at CAGRs of 35.8% and 43.4%, respectively, over the past three years. The company’s revenue has grown at a CAGR of 29.4% over the past three years.
Analysts expect VEEV’s EPS to grow 12.4% year-on-year in the current quarter, ending October 31, 2021, 21.5% for the current year and 14, 1% next year. Its revenue is expected to grow 23.4% in the current quarter, 25.2% year-over-year for the current year and 25.2% next year. The stock’s EPS is expected to grow at a rate of 17.9% over the next five years.
In comparison, over the past three years, APPF’s EBITDA and free cash flow have declined at CAGRs of 33.1% and 41.5%, respectively. The company’s revenue has grown at a CAGR of 25.2% over the past three years.
APPF’s EPS is expected to decline 96.1% year-on-year in the current quarter, ending September 30, 2021, and 90.6% in the current year, and increase by 81, 7% next year. Its revenue is expected to grow 11.2% year-on-year in the current quarter, 13.5% year-on-year in the current year and 19.2% next year. Analysts expect the stock’s EPS to rise at a rate of 25% per year over the next five years.
The turnover of the last 12 months of VEEV is almost 5.1 times that generated by the APPF. VEEV is also more profitable, with a rate of 72.6% Gross margin against 60.3% for the APPF.
Additionally, VEEV’s ROA and ROTC of 9.7% and 12.1%, respectively, compare to the negative returns of APPF.
In terms of non-GAAP forward P / E, the APPF is currently trading at 283.94x, which is 69.9% higher than the 283.94x of the APPF.
In terms of forward EV / EBITDA, the 100.36x of the APPF is 73.7% higher than the 57.78x of the VEEV.
While the APPF has an overall D rating which translates to Sell in our property POWR odds system, VEEV has an overall rating of B, which is equivalent to Buy. POWR scores are calculated taking into account 118 different factors, each weighted to an optimal degree.
In terms of Quality, VEEV obtained an A rating, which is consistent with its profitability ratios above those of the industry. VEEV has a 12-month rolling EBITDA margin of 28.9%, which is 382.8% above the industry average of 6%. However, the APPF’s C rating for quality is in line with its lower values ââthan the industry. The company has a 12-month rolling EBITDA margin of 2%, which is 86.7% below the industry average of 14.7%. VEEV has an A rating for Sentiment, which is consistent with analysts’ favorable estimates of its earnings. Analysts expect VEEV’s EPS to rise 12.4% year-on-year to $ 0.88 in the current quarter, ending October 31, 2021. However, the APPF’s D rating for Sentiment is in line with analysts’ forecasts that its EPS will decline 96.1% year-on-year. -year at $ 0.16 in the current quarter, ending September 30, 2021.
Of the 83 actions of Medical services industry, VEEV is ranked # 16. APPF is ranked n Â° 105 out of 147 shares in the Software application industry.
Beyond what we have stated above, our POWR rating system has also rated APPF and VEEV for growth, value, momentum and stability.
Get all APPF assessments here. Also, Click here to see additional POWR ratings for VEEV.
Click here to view our Software Industry Report for 2021
While the growing demand for cloud-based software platforms is expected to benefit both the APPF and VEEV, we believe its lower valuation and better analyst sentiment make VEEV a better buy here.
Our research shows that the odds of success increase when betting on stocks with an overall buy or strong buy POWR rating. Click here to access top rated stocks in the software industry – applications, and here for those in the Medical – Services sector.
Click here to view our 2021 Cloud Computing Industry Report
VEEV shares were unchanged on Friday after trading hours. Year-to-date, VEEV has gained 10.98%, compared to an 18.83% increase in the benchmark S&P 500 over the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a particular interest in finding market inefficiencies. She is passionate about educating investors so that they can be successful on the stock market. Following…