The Ultimate Software Group, Inc. (ULTI): Is Chasing Gains From HCM Cloud Software Worth the Risk?

From the above table, it appears that both Jive and Cornerstone have plenty of ground to cover in terms of customer base and bottom line in order to catch up with The Ultimate Software Group, Inc. (NASDAQ:ULTI), which has the advantage of being ahead in the game. Notably for Ultimate Software, founded in 1990, this June marked its 15th year as a publicly traded company. Jive Software Inc (NASDAQ:JIVE), on the other hand, was incorporated in 2001 and went public in an IPO in December 2011. Cornerstone, established in 1999, IPO’d in March that same year.

It is also significant to note that Ultimate Software pioneered the shift of HCM software development to cloud computing in 2002. Manifesting this culture at product innovation, the company’s HR and payroll Software-as-a-Service (SaaS) solutions were the first of such offerings in the industry.

Foolish take

With a consensus 2013 earnings growth of 32.45% year over year compared to the computer software industry’s expected 8% clip, The Ultimate Software Group, Inc. (NASDAQ:ULTI) can indeed look attractive. Having said that, initiating a position on this equity may be considered a leap of faith on future earnings as its shares are trading at a P/E around the 177 level, and its one-year forward P/E is hovering at the 161 mark. Hence, as a final take, if every cloud or crisis has a silver lining, pursuit of such a gain may call for some bold risk-taking.

Arturo Cuevas has no position in any stocks mentioned. The Motley Fool recommends The Ultimate Software Group. Arturo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Is Chasing Gains From HCM Cloud Software Worth the Risk? originally appeared on Fool.com and is written by Arturo Cuevas.

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