Stock (Symbol) |
Ultimate Software (ULTI) |
Stock Price |
$203 |
Sector |
| Technology |
Data is as of |
| October 29, 2015 |
Expected to Report |
| Feb 1 – Feb 5 |
Company Description |
 ULTI is a cloud provider of people management solutions, referred to as human capital management (HCM).UltiPro product suite (UltiPro) is engaging solution that has human resources (HR), payroll, and benefits management and includes global people management, available in approximately 10 languages with over 35 country-specific localizations. Its solution includes feature sets for talent acquisition and onboarding, HR management and compliance, benefits management and online enrollment, payroll, performance management, compensation management with salary planning, budgeting, and development of incentive plans, succession management, reporting and analytical decision-making and predictive tools, and time and attendance. Its customers represent a variety of industries, including manufacturing, food services, sports, technology, finance, insurance, retail, real estate, transportation, communications, healthcare. Source: Thomson Financial |
Sharek’s Take |
 Ultimate Software (ULTI) develops and operates cloud-based human resource software. Its UltiPro processes payroll, benefits, and time clock abilities. Optional add-ons include recruiting and new employee tools, as well as its Talent Management suite which is composed of Performance Management, Talent Predictors and Succession Management. The company was founded in 1990 by Scott Scherr, the current CEO, went public in 1998, and went to a cloud-based platform in 2002. Revenue since 2002 has grown at a CAGR of 20% — with record revenue each year. Recurring revenue accounts for 80% of sales and the company has a 95% customer retention rate. There’s high levels of certainty and consistency with ULTI, but the stock is rich. This 20% to 25% profit grower has consistently had a P/E in the 80s, but now sells for 65x earnings. The company also wins numerous Best Workplace awards (just look at the corporate headquarters). I will add the stock to the Growth Portfolio. My 2016 Fair Value is $251. |
One Year Chart |
 So ULTI has a 65 P/E and Est LTG of 22%. Hard to believe but yes, because of the recurring revenue. The company is expected to grow profits 24% in 2016 and has been beating earnings estimates by around 10% the past 4 qtrs. So maybe 30% to 35% profit growth in 2016? Would be nice if the stock would go up 35% but that’s too much to ask. |
Fair Value |
 The odd $1.24 profit figure in 2007 really distorts this chart. Otherwise each year would be a record year for earnings. Note how high this P/E has been over the years. The only time the stock wasn’t expensive was the stock market crash of 2008/2009. With quality growth stocks continuing to keep their premium P/Es, I feel ULTI is worth 80x earnings or $251 a share. |
Bottom Line |
 Here in the ten-year chart you can see the stock fell in 2008. And it really got dumped on high volume. Since then the stock’s been trending higher, but it can be volatile so it’s best to buy-and-hold.
Ultimate Software is the ultimate software for human resources. Although the stock is expensive, it delivers a high degree of certainty due to its recurring revenue stream (clients are signed up for years). ULTI is a rapid-growth story and I will add the stock to the Growth Portfolio and Aggressive Growth Portfolio where it will rank 10th in each Power Rankings. |
Power Rankings |
Growth Stock Portfolio
10 of 36Aggressive Growth Portfolio 10 of 17Conservative Stock Portfolio N/A |
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