Stock (Symbol) |
Ultimate Software (ULTI) |
Stock Price |
$210 |
Sector |
| Technology |
Data is as of |
| June 11, 2017 |
Expected to Report |
| Jul 24 |
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. Source: Thomson Financial |
Sharek’s Take |
 Ultimate Software (ULTI) just went through a hiring spree to boost long-term growth, but this came with short-term costs as the new staff had to be trained. Total staff rose from from 3055 a year ago to 3800 last qtr. That’s quite a jump. But for the last three qtrs profit growth was below-par (declining from 23% to 13%, 10% and 3%). Now, growth looks to accelerate (to 20% 37%, 38% and 35% the next four qtrs) and that could mean good news for the stock. Ultimate Software provides medium sized and large companies cloud-based software to do human resources work. ULTI 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. ULTI has a a customer retention rate of 97% and sales have grown quarter-over-quarter on a consecutive basis since June 2013. I love the high profit growth rate via a subscription model. Other investors do too, and have rewarded the stock a 53 P/E. But that’s a low P/E for ULTI historically, and my Fair Value is a P/E of 60, which equates to a stock price of $239 this year and $296 in 2018. |
One Year Chart |
 ULTI grew sales 22% last qtr, and profits increased 3% on the additional labor costs. ULTA did beat the street, but only by a little. Annual profit estimates stayed steady. Qtrly profit estimates also remained consistent with last qtr, with growth expected to be 20%, 37%, 38% and 35% the next 4 qtrs. Nice Est. LTG of 22% per year. |
 Notice this stock had a median P/E of 67 in 2014 and 2015. My Fair Value is a P/E of 60. I don’t think I’m asking for too much. Note the Upside for 2018 is a good 40% higher than the recent quote. |
Bottom Line |
 Ultimate Software’s ten-year chart really shows the power behind the company’s business model. I do wish to point out 2007 had a big one-time profit, and when future years are compared to that they are in red, signifying non-record years. With accelerating profit growth on the horizon, ULTI ranks 17th in the Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
17 of 33Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
