Ultimate Software Group (Nasdaq:ULTI) has been downgraded by TheStreet Ratings from buy to hold. The company’s strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company’s return on equity has been disappointing.
Highlights from the ratings report include:
Compared to its closing price of one year ago, ULTI’s share price has jumped by 54.78%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock’s past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Software industry and the overall market, ULTIMATE SOFTWARE GROUP INC’s return on equity is significantly below that of the industry average and is below that of the S&P 500.
ULTI’s debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.29 is very weak and demonstrates a lack of ability to pay short-term obligations.
The net income growth from the same quarter one year ago has significantly exceeded that of the Software industry average, but is less than that of the S&P 500. The net income increased by 28.6% when compared to the same quarter one year prior, rising from $0.26 million to $0.33 million.
The revenue growth came in higher than the industry average of 7.2%. Since the same quarter one year prior, revenues rose by 15.9%. This growth in revenue does not appear to have trickled down to the company’s bottom line, displaying stagnant earnings per share.
The Ultimate Software Group, Inc. designs, markets, implements, and supports unified human capital management (HCM) software-as-service (SaaS) solutions to businesses, providing a single source for comprehensive human resources, payroll, and talent management technology. The company has a P/E ratio of 523, below the average internet industry P/E ratio of 719.1 and above the S&P 500 P/E ratio of 16.7. Ultimate Software Group has a market cap of $1.6 billion and is part of the technology sector and internet industry. Shares are up 16.4% year to date as of the close of trading on Tuesday.
Source:http://www.thestreet.com/story/11097024/1/ultimate-software-group-inc-stock-downgraded-ulti.html
