The Ultimate Software Group (NASDAQ:ULTI) and Cadence Design Systems (NASDAQ:CDNS) are both large-cap computer and technology companies, but which is the superior business? We will compare the two businesses based on the strength of their profitability, institutional ownership, earnings, analyst recommendations, risk, dividends and valuation.
Insider & Institutional Ownership
91.2% of The Ultimate Software Group shares are owned by institutional investors. Comparatively, 83.9% of Cadence Design Systems shares are owned by institutional investors. 3.0% of The Ultimate Software Group shares are owned by company insiders. Comparatively, 2.6% of Cadence Design Systems shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.
Profitability
This table compares The Ultimate Software Group and Cadence Design Systems' net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| The Ultimate Software Group | 4.78% | 8.84% | 3.38% |
| Cadence Design Systems | 42.68% | 48.31% | 28.21% |
Analyst Ratings
This is a summary of current ratings and target prices for The Ultimate Software Group and Cadence Design Systems, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| The Ultimate Software Group | 0 | 0 | 0 | 0 | N/A |
| Cadence Design Systems | 1 | 2 | 9 | 0 | 2.67 |
Cadence Design Systems has a consensus target price of $140.9167, suggesting a potential downside of 4.31%. Given Cadence Design Systems' higher possible upside, analysts plainly believe Cadence Design Systems is more favorable than The Ultimate Software Group.
Earnings & Valuation
This table compares The Ultimate Software Group and Cadence Design Systems' gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| The Ultimate Software Group | $1.14 billion | 9.20 | $65.14 million | $2.39 | 138.64 |
| Cadence Design Systems | $2.34 billion | 17.59 | $988.98 million | $3.53 | 41.72 |
Cadence Design Systems has higher revenue and earnings than The Ultimate Software Group. Cadence Design Systems 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.
Volatility and Risk
The Ultimate Software Group has a beta of 1.29, suggesting that its stock price is 29% more volatile than the S&P 500. Comparatively, Cadence Design Systems has a beta of 1.05, suggesting that its stock price is 5% more volatile than the S&P 500.
Summary
Cadence Design Systems beats The Ultimate Software Group on 9 of the 13 factors compared between the two stocks.
