Ultimate's Mid-Market Push Isn't Enough To Satisfy Investors
- Ultimate has taken advantage of the transition towards the cloud and outpace the industry's slow growth. They have been able to grow revenue double digits while improving profitability.
- Yet due to their current size and the competitive environment, Ultimate will have a difficult time accelerating revenue growth. This is important due to high growth expectations.
- Management is implementing a new mid-market sales team. This sales team is targeting companies with 100 to 500 employees. Yet, the impact of the new sales team will be limited.
- Despite a decline of 12.3% YTD, Ultimate's stock is overvalued compared to peers. The stock is trading at a similar valuation to faster growing companies.
- Ultimate should continue to grow double digits but investors are expecting a significant acceleration of growth. Significant revenue acceleration shouldn't occur which will result in the stock underperforming.