Stock (Symbol) |
Ultimate Software (ULTI) |
Stock Price |
$180 |
Sector |
| Technology |
Data is as of |
| March 7, 2016 |
Expected to Report |
| Apr 26 – May 2 |
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) made a big bounce when it soundly beat earnings estimates. Ultimate software 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. There was fear the U.S. could go into a recession and of course that could affect HR spending, perhaps on software. Now those fears seem to be a thing in the past. The company was founded in 1990 by the current CEO Scott Scherr, it 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 sales 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 always rich. This 20% to 25% profit grower sells for 56x earnings, down from 65x last qtr. This is a premier growth stock to own, with plenty of growth opportunity, but it does have risk with the high P/E. |
One Year Chart |
 I was expecting just 9% profit growth last qtr as the company had tough comparisons from a year ago. But ULTI soundly beat profit estimates of $0.74 by 9 cents and delivered 22% growth on a solid 26% increase in revenue. The company has beaten earnings estimates by around 10% the past 5 qtrs. 2016 profit estimates just increased from $3.14 to $3.23. Solid qtrly Estimates ahead. |
Fair Value |
 My Fair Value on ULTI is 70x earnings, which right now is $226 a share. That would be a big jump from this level, and might be hard to do right now as investors appreciate conservative stocks in the current environment. This stock has excellent long-term upside. |
Bottom Line |
 Ultimate Software is the ultimate software for human resources, and the stock is a solid choice for growth accounts. ULTI is stock is expensive, but has delivered consistent growth for many years and has a high degree of certainty due to its recurring revenue stream. ULTI ranks 6th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
6 of 36Aggressive Growth Portfolio 6 of 16Conservative Stock Portfolio N/A |
