Watch Out: Barbarians At The Gate For Veeva Systems (VEEV)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Veeva Systems ( VEEV) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Veeva Systems as such a stock due to the following factors:

  • VEEV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.4 million.
  • VEEV has traded 487,927 shares today.
  • VEEV traded in a range 218.1% of the normal price range with a price range of $1.43.
  • VEEV traded above its daily resistance level (quality: 85 days, meaning that the stock is crossing a resistance level set by the last 85 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on VEEV:

Veeva Systems Inc. provides cloud-based software solutions for the life sciences industry in North America, Europe, the Asia Pacific, and Latin America. VEEV has a PE ratio of 102. Currently there are 8 analysts that rate Veeva Systems a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Veeva Systems has been 1.4 million shares per day over the past 30 days. Veeva Systems has a market cap of $2.0 billion and is part of the technology sector and computer software & services industry. Shares are up 5.2% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Veeva Systems as a sell. The company's weaknesses can be seen in multiple areas, such as its premium valuation and weak operating cash flow.

Highlights from the ratings report include:
  • Net operating cash flow has significantly decreased to -$1.42 million or 108.75% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • This stock has increased by 41.25% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • VEEVA SYSTEMS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, VEEVA SYSTEMS INC increased its bottom line by earning $0.28 versus $0.10 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus $0.28).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Technology industry. The net income increased by 113.3% when compared to the same quarter one year prior, rising from $6.25 million to $13.33 million.

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