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FBR Capital Starts Ultimate Software (ULTI) at Market Perform

May 21, 2014 5:03 PM EDT
Get Alerts ULTI Hot Sheet
Price: $331.36 --0%

Rating Summary:
    15 Buy, 17 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 9 | Down: 8 | New: 10
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FBR Capital initiates coverage on Ultimate Software (NASDAQ: ULTI) with a Market Perform rating and a price target of $150.00.

Analyst Samad Samana comments, "Ultimate Software provides HR, payroll, and other human capital management (HCM) applications for small, medium, and large enterprises. Founded in 1990, the company started as an on-premise software vendor and then launched its first software-as-a-service (SaaS) solution in 2002. Over the years, the company has built a broader HCM suite around its core HR/payroll systems. In the cloud, Ultimate Software has merged the offerings of the traditional service bureaus (ADP, Ceridian, and Paychex) and the HCM vendors (Oracle, SAP, and Workday), a key differentiating factor. The company’s growth has largely been driven by replacing the traditional service bureaus and then cross-selling optional capabilities into its installed base. Based on our recent field checks, we believe ULTI can continue to drive solid growth as it (1) further builds out its client base, (2) increases adoption of optional services within its existing installed base, and (3) moves downstream into smaller enterprises. We believe that enterprises will spend the next several years replacing aging, on-premise back-office applications with modern, cloud-based ones and that Ultimate Software has positioned itself to ride this wave. The company's measured approach has allowed it to deliver 20% or better revenue growth while generating solid margins, making it unique among the SaaS peer group. While the company's profitability is greater, its growth rate trails the group average. We are initiating with a Market Perform rating, as we believe these factors will balance each other out and ULTI will perform in line with the peer group."

For an analyst ratings summary and ratings history on Ultimate Software click here. For more ratings news on Ultimate Software click here.

Shares of Ultimate Software closed at $125.58 yesterday.



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