Steve Jobs once called the computer "a bicycle for the mind." His analogy stems from a study that showed humans become the most energy-efficient travelers among the animal kingdom when riding a bicycle. Jobs wasn't just talking about physical hardware, but the combination of hardware and software to create the multiplying effect. For knowledge workers, cloud software can act as a bicycle, leveraging their skills, smarts, and hard work. This provides a compelling reason for businesses to embrace these tools and investors to invest.

Let's take a look at two cloud companies that are building impressive software platforms and see which stock would be a better buy today.

Comparison of key metrics

When comparing two companies, it's helpful to look at the key metrics side-by-side. Even though Veeva (NYSE:VEEV), a life sciences business management software company, was founded a year after Hubspot (NYSE:HUBS), an inbound marketing software platform, it sports a 68% higher trailing 12-month revenue number. Hubspot has had a more impressive compound annual growth rate over the last three years, but for the rest of the metrics, Veeva comes out ahead.

Metrics

Veeva

Hubspot

Year founded / IPO year

2007 / 2013

2006 / 2014

TTM revenues

$1.28 billion

$0.76 billion

Three-year growth CAGR

26%

36%

MRQ revenue growth

33%

25%

TTM net income % of revenue

26%

(9%)

Cash and marketable securities

$1.50 billion

$1.14 billion

Debt

$0.06 billion

$0.77 billion

TTM operating cash flow

$488 million

$57 million

Note: Numbers that are bolded indicate the "better" result. TTM = trailing-12-months, CAGR = compound annual growth rate, MRQ = most recent quarter. Data source: Wikipedia and Yahoo Finance, table by author.

Veeva is seeing better recent growth in the midst of the coronavirus, is more profitable, has a more impressive balance sheet, and boasts significantly higher operating cash flow. But before jumping to declare a winner just yet, let's take a closer look at each business.

The case for Veeva

Veeva has built its success on providing the highly regulated life sciences industry with software to run their businesses efficiently and in a compliant way. Its first product was Veeva CRM, which helps sales and marketing teams manage customer and physician engagements. Today, CRM revenue makes up about half the top line but is growing slower (25% year over year) than its flagship product Vault, which is expected to hit 33% year-over-year growth this fiscal year. Vault's modules enable digital end-to-end business management for research and development, manufacturing, and even post-production support.

Veeva's customer list of major pharmaceutical and medical device companies is impressive. As of Jan. 31, it had 861 customers including some of the largest life sciences companies such as Merck, Bayer AG, and Novartis. This gives the company a huge boost of credibility when it works with new customers who are considering adopting its software.

What's even more impressive is that over time, these customers expand their footprint to embed the tools even deeper into their enterprises. As of the last investor presentation last October, its customers averaged 2.4 Vault products and 3.4 CRM products, and spend progressively more the longer they are a customer.

As for the coronavirus, it isn't slowing down Veeva's growth. In fact, management shared on the most recent earnings call that they expect 28% annual revenue gains this year and are even more confident in the company's ability to reach its $3 billion annual revenue goal by 2025.

Businessman in casual jacket and tie, sitting under a tree with a bike, working on his laptop.

Image source: Getty Images.

The case for Hubspot

Hubspot helps businesses "grow better" by providing software to attract, engage, and delight customers without relying on spam emails or cold-calling. It started with customer marketing tools but now has expanded into sales, service, and content management functions. These modules work seamlessly together and as standalone SaaS tools, so customers can start with just one module for their most urgent needs and grow their footprint over time. This approach has proven to be a highly successful strategy to drive growth.

In its most recent quarter, the company added a record 7,800 customers, bringing its total to 86,000. Constant currency revenue growth slowed sequentially from 33% in the first quarter to a 26% year-over-year gain for second quarter 2020 as the pandemic affected customer spending. With two-thirds of its revenue coming from customers with 25 employees or more, Hubspot is considerably exposed to small businesses as they struggle with a coronavirus-driven recession.

Despite these headwinds, management raised its revenue growth guidance for the year to 23%.This is considerably lower than its 2019 mark of 32%, but impressive given the challenging business environment.

One is clearly a better buy

Returning to the bicycle analogy, both of these companies are succeeding in their missions to provide their customers with powerful tools (or bicycles) to grow their businesses more efficiently, but only one is a better investment today.

It would be tempting just to call Veeva the winner based solely on its coronavirus immunity, but there's more to it than that. It has impressive and consistent profits business and a cash-rich balance sheet (with little debt) which provide the company tremendous flexibility. But that's not all. It's also the leading cloud partner to a $2 trillion industry and is investing heavily to keep its lead, which will fuel its growth for years to come.

Even though some think Veeva is "absurdly overvalued" at a 33 price-to-sales ratio (more than twice Hubspot's 16), I'd argue it's worth paying up for this growth stock and is the better buy today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.