Stock (Symbol) |
Ultimate Software (ULTI) |
Stock Price |
$206 |
Sector |
| Technology |
Data is as of |
| September 22, 2016 |
Expected to Report |
| Oct 25 – 31 |
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) helps businesses move their human resources information to the cloud. Ultimate Software was founded in 1990 by the current CEO Scott Scherr, went public in 1998, and went to a cloud-based platform in 2002. Its UltiPro processes payroll, benefits, and time clock abilities and 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. Revenue since 2002 has grown at a CAGR of 20% — with record sales each year. The company has a beautiful headquarters just west of Ft. Lauderdale Florida and InformationWeek identified Ultimate as the most rewarding place to work in IT. Forbes also ranked it 8th on its 2016 list of the most innovative growth companies. I feel ULTI can continue to grow sales and profits 20% to 25% a year long-term as companies improve technology and efficiency through advanced software. The only negative is this stock typically has a P/E in the 60s, but I think its well deserved as the company has a a customer retention rate of 97% in addition to new customer adds. Sales have grown quarter-over-quarter on a consecutive basis since June 2013. Ultimate Software is one of my favorite companies, and one of the top growth stocks in the Growth Portfolio. |
One Year Chart |
 ULTI came down a bit after it meerly met profit estimates last qtr. Overall the company delivered 23% profit growth on a 27% gain in sales. Profit growth Estimates for the next 4 qtrs are 12%, 24%, 22% and 28%. Next qtr profit growth is expected to slow as the company ramps up with sales reps for the record number of bookings recorded last qtr and also some new product releases set for January 2017. |
Fair Value |
 I trimmed my Fair Value on ULTI is from 70x earnings to 67% as the company failed to beat profit estimates last qtr and that took a little momentum away. Also, only 12% growth is expected for next qtr and although those who follow the stock don’t mind (computers and people who don’t do their homework might shy away). Even at 62x earnings this stock is slightly undervalued in my eyes. But the big opportunity is in 2017 as my Fair Value is $275 — 34% above the recent quote. |
Bottom Line |
 Ultimate Software has a full suite of human resources services that can help companies move their HR to the cloud. Although the valuation is rich the there’s high degrees of certainty and consistency in addition to growth opportunity of around 25% per year. Also, we are getting towards the end of the year and thus my 2017 Fair Value of $275 is about to come into play. ULTI ranks 10th in the Growth Portfolio Power Rankings and Aggressive Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
10 of 38Aggressive Growth Portfolio 10 of 17Conservative Stock Portfolio N/A |
