Tuesday, 27 October 2015

It's Time to Short Ultimate Software

The Ultimate Software Group. (NASDAQ: ULTI)
Technology; Internet Software and Services; 30%-50% Downside

The HCM industry is set to grow in the coming years. But the market has very high expectations, which can't be met by single-digit growth of the industry. Hyper-optimism around the industry will come to an end once the companies deliver less rosy results in the coming years. Ultimate Software is the most expensive company in the space with the highest PE, but it lags in revenue growth compared to some of its counterparts. The company isn't a clear leader, as Workday and SuccessFactors lead the pack on several instances. Insiders and institutional investors are reluctant to buy, which is an indication of imminent reversal. Not a single valuation scenario reveals any upside; average of all price targets reveals 39% downside.