Shares of Veeva Systems (VEEV -1.32%), a provider of cloud services for life science companies, have surged nearly 90% over the past 12 months. Let's delve deeper into Veeva, examine the bullish and bearish cases, and see if its stock is still worth buying after its year-long rally.

What does Veeva do?

Veeva was co-founded by Peter Gassner, Salesforce's (CRM -2.45%) former SVP of Technology, who saw a market opportunity in providing dedicated cloud services to biotech and pharmaceutical companies.

It offers two main products: Veeva Commercial Cloud, which offers CRM (customer relationship management) services, data analytics applications, and other related services; and Veeva Vault, a unified suite of cloud-based enterprise content and data management applications.

A doctor checks a patient's digital health data.

Image source: Getty Images.

Veeva generated 49% of its revenue from the Veeva Commercial Cloud in the first half of fiscal 2021, and the other 51% from Veeva Vault. 80% of its total revenue came from subscriptions for those two platforms, while the remaining 20% came from related professional services.

Over the past year, Veeva expanded its digital healthcare ecosystem by acquiring Crossix, a leader in privacy-safe patient data and analytics, and Physicians World, a provider of speaker bureau services.

Why the bulls love Veeva

Veeva's services help nearly 900 customers, including pharmaceutical giants like AstraZeneca and Merck, maintain customer relationships, keep track of clinical trials and regulations, and store and analyze their data on the cloud. Veeva enjoys a first-mover's advantage in this market, its platform is easy to scale because it runs on Salesforce's services, and its ecosystem is incredibly sticky.

Escalating competition between top drugmakers has boosted demand for Veeva's services in recent years. Its revenue and non-GAAP net income rose 28% and 36%, respectively, in fiscal 2020, which ended on Jan. 31. Its full-year gross margin expanded from 73.3% to 74.7%, while its operating margin rose from 35.6% to 37.3%.

In the first half of fiscal 2021, Veeva's revenue rose 35% year-over-year as its non-GAAP net income grew 33%. For the full year, Veeva expects its revenue to grow 28%-29%, and for its non-GAAP EPS to rise 21%-22%.

Veeva also maintained its long-term goal of generating $3 billion in annual revenue by fiscal 2025 -- compared to its guidance for about $1.4 billion in revenue for 2021. That forecast suggests Veeva's annual revenue growth rate will remain above 20% over the next five years.

Why the bears are skeptical

Veeva's long-term growth looks rock-solid, but its stock trades at over 100 times forward earnings and 25 times next year's sales. Those valuations are frothy relative to those of many other cloud stocks.

A network of cloud computing connections.

Image source: Getty Images.

By comparison, Salesforce trades at 70 times forward earnings and nine times next year's sales. Wall Street expects it to grow its revenue and earnings by 22% and 25%, respectively, this year.

Veeva also faces competition from rivals like IQVIA (IQV -0.02%), a healthcare IT and research company that offers similar cloud-based CRM services built on Salesforce's platform. Medidata, which was recently acquired by French software company Dassault Systèmes, is another potential challenger.

Neither of these companies offers a complete suite of products that directly competes against Veeva Vault yet, but they could still bundle their cloud-based services with other products and services. IQVIA and Medidata are also suing Veeva over the alleged theft of trade secrets -- and both unresolved cases could cause unexpected headaches down the road.

Lastly, Veeva generated 36% of its revenue from its top ten customers last year. That customer concentration represents a significant risk, especially as hungry competitors nip at Veeva's heels.

Is it the right time to buy Veeva?

I started a position in Veeva in August, and I still plan to buy more shares in the future. I expect Veeva to continue expanding its customer base, growing its revenue per customer with new services, and maintaining a comfortable lead against less cohesive rivals like IQVIA and Medidata.

Veeva's stock isn't cheap, but I believe its first-mover's advantage, its robust growth through the COVID-19 crisis, and its clear outlook for the next five years all justify its premium valuation.