Microsoft Corporation (NASDAQ: MSFT) and The Ultimate Software Group (NASDAQ:ULTI) are both mid-cap computer and technology companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, profitability, analyst recommendations, institutional ownership, earnings, risk and valuation.

Profitability

This table compares Microsoft Corporation and The Ultimate Software Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Microsoft Corporation 23.57% 36.81% 11.46%
The Ultimate Software Group 3.47% 7.20% 2.55%

Earnings & Valuation

This table compares Microsoft Corporation and The Ultimate Software Group’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Microsoft Corporation $89.95 billion 6.38 $30.43 billion $2.70 27.59
The Ultimate Software Group $860.72 million 6.57 $62.29 million $0.98 193.47

Microsoft Corporation has higher revenue and earnings than The Ultimate Software Group. Microsoft Corporation is trading at a lower price-to-earnings ratio than The Ultimate Software Group, indicating that it is currently the more affordable of the two stocks.

Dividends

Microsoft Corporation pays an annual dividend of $1.56 per share and has a dividend yield of 2.1%. The Ultimate Software Group does not pay a dividend. Microsoft Corporation pays out 57.8% of its earnings in the form of a dividend. The Ultimate Software Group has increased its dividend for 13 consecutive years.

Volatility and Risk

Microsoft Corporation has a beta of 1, suggesting that its stock price has a similar volatility profile to the S&P 500.Comparatively, The Ultimate Software Group has a beta of 1.09, suggesting that its stock price is 9% more volatile than the S&P 500.

Insider & Institutional Ownership

73.4% of Microsoft Corporation shares are owned by institutional investors. 3.0% of Microsoft Corporation shares are owned by company insiders. Comparatively, 4.9% of The Ultimate Software Group shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Microsoft Corporation and The Ultimate Software Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Microsoft Corporation 2 8 26 0 2.67
The Ultimate Software Group 0 3 16 0 2.84

Microsoft Corporation currently has a consensus target price of $77.09, suggesting a potential upside of 3.49%. The Ultimate Software Group has a consensus target price of $235.29, suggesting a potential upside of 24.10%. Given The Ultimate Software Group’s stronger consensus rating and higher possible upside, analysts clearly believe The Ultimate Software Group is more favorable than Microsoft Corporation.

Summary

Microsoft Corporation beats The Ultimate Software Group on 9 of the 17 factors compared between the two stocks.

About Microsoft Corporation

Microsoft Corporation is a technology company. The Company develops, licenses, and supports a range of software products, services and devices. The Company’s segments include Productivity and Business Processes, Intelligent Cloud and More Personal Computing. The Company’s products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games, and training and certification of computer system integrators and developers. It also designs, manufactures, and sells devices, including personal computers (PCs), tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories, that integrate with its cloud-based offerings. It offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and it provides solution support and consulting services.

About The Ultimate Software Group

The Ultimate Software Group, Inc. (Ultimate) is a cloud provider of people management solutions, referred to as human capital management (HCM). The Company’s UltiPro product suite (UltiPro) is an engaging solution that has human resources (HR), payroll and benefits management. As of December 31, 2016, UltiPro included global people management, available in 14 languages with more than 35 country-specific localizations. The solution is delivered through software-as-a-service (SaaS) to organizations based in the United States and Canada, including those with global workforces. The UltiPro solution includes feature sets for talent acquisition and onboarding, HR management and compliance, benefits management and online enrollment, payroll, performance management, compensation management with salary planning, budgeting, and development of incentive plans, succession management, reporting and analytical decision-making and predictive tools, and time and attendance.

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