Veeva Systems (NYSE:VEEV) has been a great stock to own over the past five years, with shares having more than quadrupled in that time. Sadly, investors who missed out on that run-up can't hop in their time machines and retroactively buy shares. That's why they're much more concerned about the next five years.

Despite this stellar performance, Veeva still may be a stock worth buying today. There are three potential developments over the next five years investors should keep an eye on.

A doctor holding an information and data cloud

Image source: Getty Images

More tools lead to higher switching costs

As with any software-as-a-service (SaaS) company, Veeva benefits from high switching costs. When a client starts using software on a daily basis -- training employees, storing mission-critical data, and developing tailored solutions -- they have no desire to switch mid-course. 

That's doubly true for Veeva's customers. The company has become the de-facto provider of cloud services for the pharmaceutical industry. Drug companies can do everything from collecting trial data to monitoring FDA compliance to tracking sales figures on Veeva's platform.

Veeva started out by offering a simple customer relationship management (CRM) platform. But with the introduction of Veeva Vault in 2011, the company began offering a number of applications that have caught on like wildfire. Historically, there are three broad Veeva offerings: clinical, regulatory, and quality. Within each of these offerings are a number of tools customers pay subscription fees to use. As you can see, Vault has been a hit.

Chart showing revenue by segment at Veeva over time

Chart by author. Data source: SEC filings

While specific year-to-date numbers aren't available, we already know that Vault has eclipsed the Commercial Cloud in revenue.

Two newer offerings have just hit the market as well: a safety platform that can coordinate responses to adverse drug effects, and Veeva Nitro, a database warehouse. I expect that as Veeva continues to gather information from clients, the list of subscription tools will only grow, creating an even wider moat between Veeva and anyone that might want to take business away.

An acquisition?

Veeva is a pretty expensive stock. It trades for almost 70 times non-GAAP earnings. For a company to try and acquire Veeva, they'd have to pay a steep premium. This isn't a scenario I see taking place in the immediate future.

However, if Veeva were to somehow stumble, or if the broader market were to stop paying such a high premium for SaaS stocks, Veeva could easily become a prime target for a larger company. Salesforce.com, for instance, is intimately aware of Veeva's potential. Part of Veeva's commercial cloud runs on the Salesforce platform. Veeva's founder, Peter Gassner, is also a former Salesforce executive.

Why would a company want to acquire Veeva? Outside of the safety provided by the aforementioned high switching costs, Veeva churns out free cash flow.

Veeva cash flow by year

Chart by author. Data source: SEC filings

What's more, those 2019 figures only represent growth through the first nine months of the year. The figure will likely be even larger when the company reports fourth-quarter earnings in early 2020.

Life outside life sciences

Three years ago, a funny thing happened: Companies outside of pharmaceuticals heard about the ease and effectiveness of Veeva's platform. They contacted Veeva and started asking for solutions within their respective industries. 

Because pharmaceuticals are a highly regulated market -- and Veeva is the leader in providing the type of cloud solution that can navigate these regulations -- three other highly regulated industries have entered the fray: chemicals, consumer packaged goods, and cosmetics. 

Veeva started with Vault QualityOne, a platform to manage documents, training, and quality management. Gassner and his fellow executives have been tight-lipped on how well this new business is growing, but we do have some details. In the most recent conference call, Gassner said he was very pleased with progress.

Beyond those assurances, Veeva is confident enough that it has developed three new tools for these three other industries: Veeva Claims, Veeva RegulatoryOne, and an enterprise content management platform.

I would not be surprised to see other regulated industries continue showing interest in Veeva's offerings over the next five years.

What you should do with this information

As I said, Veeva is not a cheap stock. But it's also one of the highest quality cloud companies on the public markets today. If you want to own shares -- as I do -- I suggest buying a small portion and then adding to it over time. As you get to know the company better, you can get better entry points over time. That type of slow and steady approach helps manage both your finances and your emotions -- leading to the type of results you're looking for.