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Medidata Solutions: Benefit from Growing Cloud Applications with This Stock

May 27, 2014 | About:
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Medidata Solutions (MDSO), a leader in EDS and CDMS solutions has started focusing on cloud-enabled software solutions. This attempt by the company worked well as it posted fantastic results. The cloud business is continually growing and is expected to improve in the future. Many companies are turning towards this and want to benefit from this emerging opportunity.

Medidata Solutions and some of its peers like Oracle (ORCL), SAP (SAP) and Tableau Software are focusing on cloud-enabled software solutions. Medidata's clients are mainly from sectors like pharmaceuticals, biotechnology, medical instrumentation devices, academics and government departments.

Solid Performance

Medidata’s revenue exceeded consensus estimates. Medidata clocked revenue of $68.1 million, which improved by a good 27% from last year. The top line of the company grew as a result of growth in application services, which grew 36% from last year. Also, Medidata’s gross profit rose to $13.4 million. Higher margin application services resulted in an increase in the gross margin, which increased to 75% as compared to 71% of the previous year's same quarter. The EPS came in at $0.36 per share, which outperformed analysts' estimates of $0.29.

Medidata is always busy identifying customers. Medidata also engages itself in product innovation, implementing new features in cloud application. These attempts by the company will result in improvement in revenue. As customers are cost conscious, its cloud model for clinical software provides cost savings to end customers. These efforts by the company can drive more customers to the business.

Strong Product Portfolio

Medidata is strengthening its product portfolio with new product releases. Its new product, Medidata Insight, will help it in acquiring new customers since it is the first-of-its-kind quality management solution for industry-specific solutions.

Medidata’s strategy of staying focused in the area of clinical development software on leading platforms should prove to be a growth driver for it in the future. Medidata has always been alert and has always aligned to the changing environment, which became a key reason for its success. Being in line with such a robust outlook, Medidata is expecting growth in its revenue in the future as well.

Competitors

Tableau Software is one of Medidata’s competitors. It is also focusing on cloud-based solutions. It operates in area of business intelligence and is partnering with various companies for growth. It has partnered with 1010data with the objective of providing its customers access to applications on the 1010data cloud server network for enhancing the performance of the reporting system. The company expects healthy benefits as it will help to identify critical business trends and align according to the situation.

The strategic partnership of Tableau has benefited it over time. The benefits can be justified by the fact that in its last quarter, revenue grew by 71% with the addition of 1,500 new customers. Its fantastic results caused the stock to move up by 11%.

Oracle, a leader in the software industry, is another close competitor of Medidata. With its new products, Oracle is aiming to improve in the future. Its new release of Oracle 12c and a new version of Oracle Enterprise Manager 12c makes its portfolio even stronger.

Even Oracle has benefited from partnerships with companies like Microsoft, NetSuite and Salesforce.com, which have benefited cloud and java users. Important partnerships are the way to go in cloud computing and even Oracle is following the same path.

Conclusion

Medidata has performed very well so far and its moves in clinical development should ensure growth in the future. But, the stock is expensive with a trailing P/E ratio of 106. However, the company is expected to grow earnings at a CAGR of 22% in the next five years, which makes it worth the premium.


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