Ultimate Software Group (ULTI) Shows Signs Of Being Water-Logged And Getting Wetter

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Ultimate Software Group ( ULTI) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Ultimate Software Group as such a stock due to the following factors:

  • ULTI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $40.1 million.
  • ULTI has traded 151,982 shares today.
  • ULTI traded in a range 257% of the normal price range with a price range of $8.26.
  • ULTI traded below its daily resistance level (quality: 41 days, meaning that the stock is crossing a resistance level set by the last 41 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on ULTI:

The Ultimate Software Group, Inc. provides cloud-based human capital management solutions primarily to enterprise companies. Its UltiPro software solution delivers the functionality businesses to manage the employment life cycle from recruitment to retirement. ULTI has a PE ratio of 146.8. Currently there are 9 analysts that rate Ultimate Software Group a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Ultimate Software Group has been 350,500 shares per day over the past 30 days. Ultimate Software Group has a market cap of $4.1 billion and is part of the technology sector and internet industry. The stock has a beta of 1.20 and a short float of 5.4% with 10.54 days to cover. Shares are down 3.4% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Ultimate Software Group as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 11.4%. Since the same quarter one year prior, revenues rose by 25.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ULTIMATE SOFTWARE GROUP INC has improved earnings per share by 29.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ULTIMATE SOFTWARE GROUP INC increased its bottom line by earning $0.89 versus $0.51 in the prior year. This year, the market expects an improvement in earnings ($2.01 versus $0.89).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 29.8% when compared to the same quarter one year prior, rising from $4.90 million to $6.36 million.
  • The gross profit margin for ULTIMATE SOFTWARE GROUP INC is rather high; currently it is at 63.08%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ULTI's net profit margin of 5.21% significantly trails the industry average.
  • Net operating cash flow has slightly increased to $15.43 million or 7.27% when compared to the same quarter last year. Despite an increase in cash flow, ULTIMATE SOFTWARE GROUP INC's cash flow growth rate is still lower than the industry average growth rate of 41.71%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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