AUTOMATIC DATA PROCESSING (ADP) Stock Fundamental Analysis
NASDAQ:ADP - Nasdaq - US0530151036 - Common Stock - Currency: USD
We assign a fundamental rating of 6 out of 10 to ADP. ADP was compared to 82 industry peers in the Professional Services industry. While ADP has a great profitability rating, there are some minor concerns on its financial health. While showing a medium growth rate, ADP is valued expensive at the moment.
1. Profitability
1.1 Basic Checks
ADP had positive earnings in the past year.
ADP had a positive operating cash flow in the past year.
Each year in the past 5 years ADP has been profitable.
Each year in the past 5 years ADP had a positive operating cash flow.
1.2 Ratios
ADP's Return On Assets of 6.14% is fine compared to the rest of the industry. ADP outperforms 65.82% of its industry peers.
With an excellent Return On Equity value of 77.46%, ADP belongs to the best of the industry, outperforming 93.67% of the companies in the same industry.
ADP's Return On Invested Capital of 41.33% is amongst the best of the industry. ADP outperforms 98.73% of its industry peers.
ADP had an Average Return On Invested Capital over the past 3 years of 40.21%. This is significantly above the industry average of 13.65%.
The last Return On Invested Capital (41.33%) for ADP is above the 3 year average (40.21%), which is a sign of increasing profitability.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 6.14% | ||
| ROE | 77.46% | ||
| ROIC | 41.33% |
ROA(3y)6.09%
ROA(5y)5.98%
ROE(3y)90.39%
ROE(5y)71.98%
ROIC(3y)40.21%
ROIC(5y)34.27%
1.3 Margins
Looking at the Profit Margin, with a value of 19.76%, ADP belongs to the top of the industry, outperforming 91.14% of the companies in the same industry.
In the last couple of years the Profit Margin of ADP has grown nicely.
ADP's Operating Margin of 26.43% is amongst the best of the industry. ADP outperforms 89.87% of its industry peers.
In the last couple of years the Operating Margin of ADP has grown nicely.
ADP has a Gross Margin of 46.04%. This is comparable to the rest of the industry: ADP outperforms 54.43% of its industry peers.
ADP's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 26.43% | ||
| PM (TTM) | 19.76% | ||
| GM | 46.04% |
OM growth 3Y5.45%
OM growth 5Y3.92%
PM growth 3Y4.1%
PM growth 5Y3.75%
GM growth 3Y2.32%
GM growth 5Y1.05%
2. Health
2.1 Basic Checks
ADP has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.
ADP has less shares outstanding than it did 1 year ago.
The number of shares outstanding for ADP has been reduced compared to 5 years ago.
Compared to 1 year ago, ADP has an improved debt to assets ratio.
2.2 Solvency
ADP has an Altman-Z score of 2.40. This is not the best score and indicates that ADP is in the grey zone with still only limited risk for bankruptcy at the moment.
ADP has a Altman-Z score of 2.40. This is in the lower half of the industry: ADP underperforms 62.03% of its industry peers.
The Debt to FCF ratio of ADP is 0.95, which is an excellent value as it means it would take ADP, only 0.95 years of fcf income to pay off all of its debts.
ADP's Debt to FCF ratio of 0.95 is fine compared to the rest of the industry. ADP outperforms 79.75% of its industry peers.
ADP has a Debt/Equity ratio of 0.59. This is a neutral value indicating ADP is somewhat dependend on debt financing.
ADP has a Debt to Equity ratio of 0.59. This is in the lower half of the industry: ADP underperforms 60.76% of its industry peers.
Even though the debt/equity ratio score it not favorable for ADP, it has very limited outstanding debt, so we won't put too much weight on the DE evaluation.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.59 | ||
| Debt/FCF | 0.95 | ||
| Altman-Z | 2.4 |
ROIC/WACC4.52
WACC9.14%
2.3 Liquidity
A Current Ratio of 1.00 indicates that ADP may have some problems paying its short term obligations.
Looking at the Current ratio, with a value of 1.00, ADP is doing worse than 74.68% of the companies in the same industry.
A Quick Ratio of 1.00 indicates that ADP may have some problems paying its short term obligations.
The Quick ratio of ADP (1.00) is worse than 74.68% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1 | ||
| Quick Ratio | 1 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an nice 11.95% over the past year.
Measured over the past years, ADP shows a quite strong growth in Earnings Per Share. The EPS has been growing by 10.99% on average per year.
Looking at the last year, ADP shows a small growth in Revenue. The Revenue has grown by 7.09% in the last year.
ADP shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 6.36% yearly.
EPS 1Y (TTM)11.95%
EPS 3Y15.1%
EPS 5Y10.99%
EPS Q2Q%10.33%
Revenue 1Y (TTM)7.09%
Revenue growth 3Y8.57%
Revenue growth 5Y6.36%
Sales Q2Q%8.15%
3.2 Future
The Earnings Per Share is expected to grow by 7.54% on average over the next years.
The Revenue is expected to grow by 4.79% on average over the next years.
EPS Next Y9.38%
EPS Next 2Y9.34%
EPS Next 3Y9.37%
EPS Next 5Y7.54%
Revenue Next Year6.57%
Revenue Next 2Y6.1%
Revenue Next 3Y5.9%
Revenue Next 5Y4.79%
3.3 Evolution
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
The Revenue growth rate is decreasing: in the next years the growth will be less than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
With a Price/Earnings ratio of 32.20, ADP can be considered very expensive at the moment.
Compared to the rest of the industry, the Price/Earnings ratio of ADP indicates a slightly more expensive valuation: ADP is more expensive than 63.29% of the companies listed in the same industry.
The average S&P500 Price/Earnings ratio is at 29.63. ADP is around the same levels.
ADP is valuated quite expensively with a Price/Forward Earnings ratio of 28.32.
Compared to the rest of the industry, the Price/Forward Earnings ratio of ADP indicates a slightly more expensive valuation: ADP is more expensive than 60.76% of the companies listed in the same industry.
When comparing the Price/Forward Earnings ratio of ADP to the average of the S&P500 Index (22.68), we can say ADP is valued slightly more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 32.2 | ||
| Fwd PE | 28.32 |
4.2 Price Multiples
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of ADP indicates a slightly more expensive valuation: ADP is more expensive than 62.03% of the companies listed in the same industry.
The rest of the industry has a similar Price/Free Cash Flow ratio as ADP.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 30.13 | ||
| EV/EBITDA | 22.07 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
ADP has an outstanding profitability rating, which may justify a higher PE ratio.
PEG (NY)3.43
PEG (5Y)2.93
EPS Next 2Y9.34%
EPS Next 3Y9.37%
5. Dividend
5.1 Amount
ADP has a Yearly Dividend Yield of 1.99%.
ADP's Dividend Yield is rather good when compared to the industry average which is at 1.93. ADP pays more dividend than 86.08% of the companies in the same industry.
ADP's Dividend Yield is comparable with the S&P500 average which is at 2.29.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.99% |
5.2 History
The dividend of ADP is nicely growing with an annual growth rate of 12.44%!
ADP has paid a dividend for at least 10 years, which is a reliable track record.
ADP has not decreased their dividend for at least 10 years, which is a reliable track record.
Dividend Growth(5Y)12.44%
Div Incr Years26
Div Non Decr Years26
5.3 Sustainability
ADP pays out 58.37% of its income as dividend. This is a bit on the high side, but may be sustainable.
The dividend of ADP is growing, but the earnings are growing slower. This means the dividend growth is not sustainable.
DP58.37%
EPS Next 2Y9.34%
EPS Next 3Y9.37%
310.76
-1.21 (-0.39%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners83.89%
Inst Owner Change0.06%
Ins Owners0.11%
Ins Owner Change-7.79%
Market Cap126.44B
Analysts67.27
Price Target304.31 (-2.08%)
Short Float %1.43%
Short Ratio3.31
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.99% |
Yearly Dividend5.32
Dividend Growth(5Y)12.44%
DP58.37%
Div Incr Years26
Div Non Decr Years26
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)3.01%
Min EPS beat(2)1.48%
Max EPS beat(2)4.53%
EPS beat(4)4
Avg EPS beat(4)2.24%
Min EPS beat(4)0.58%
Max EPS beat(4)4.53%
EPS beat(8)8
Avg EPS beat(8)1.91%
EPS beat(12)12
Avg EPS beat(12)2.08%
EPS beat(16)16
Avg EPS beat(16)2.64%
Revenue beat(2)2
Avg Revenue beat(2)0.39%
Min Revenue beat(2)0.22%
Max Revenue beat(2)0.57%
Revenue beat(4)2
Avg Revenue beat(4)-0.03%
Min Revenue beat(4)-0.45%
Max Revenue beat(4)0.57%
Revenue beat(8)4
Avg Revenue beat(8)-0.11%
Revenue beat(12)7
Avg Revenue beat(12)-0.02%
Revenue beat(16)10
Avg Revenue beat(16)0.08%
PT rev (1m)0.11%
PT rev (3m)7.32%
EPS NQ rev (1m)-2.36%
EPS NQ rev (3m)-1.23%
EPS NY rev (1m)-0.11%
EPS NY rev (3m)-0.11%
Revenue NQ rev (1m)-0.98%
Revenue NQ rev (3m)-0.61%
Revenue NY rev (1m)0.21%
Revenue NY rev (3m)0.22%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 32.2 | ||
| Fwd PE | 28.32 | ||
| P/S | 6.35 | ||
| P/FCF | 30.13 | ||
| P/OCF | 26.49 | ||
| P/B | 24.9 | ||
| P/tB | 815.21 | ||
| EV/EBITDA | 22.07 |
EPS(TTM)9.65
EY3.11%
EPS(NY)10.97
Fwd EY3.53%
FCF(TTM)10.31
FCFY3.32%
OCF(TTM)11.73
OCFY3.78%
SpS48.92
BVpS12.48
TBVpS0.38
PEG (NY)3.43
PEG (5Y)2.93
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 6.14% | ||
| ROE | 77.46% | ||
| ROCE | 53.71% | ||
| ROIC | 41.33% | ||
| ROICexc | 53.42% | ||
| ROICexgc | 152.5% | ||
| OM | 26.43% | ||
| PM (TTM) | 19.76% | ||
| GM | 46.04% | ||
| FCFM | 21.08% |
ROA(3y)6.09%
ROA(5y)5.98%
ROE(3y)90.39%
ROE(5y)71.98%
ROIC(3y)40.21%
ROIC(5y)34.27%
ROICexc(3y)55.5%
ROICexc(5y)46.4%
ROICexgc(3y)138.42%
ROICexgc(5y)107.72%
ROCE(3y)52.26%
ROCE(5y)44.53%
ROICexcg growth 3Y43.75%
ROICexcg growth 5Y22.92%
ROICexc growth 3Y26.59%
ROICexc growth 5Y15.01%
OM growth 3Y5.45%
OM growth 5Y3.92%
PM growth 3Y4.1%
PM growth 5Y3.75%
GM growth 3Y2.32%
GM growth 5Y1.05%
F-Score6
Asset Turnover0.31
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.59 | ||
| Debt/FCF | 0.95 | ||
| Debt/EBITDA | 0.51 | ||
| Cap/Depr | 101.32% | ||
| Cap/Sales | 2.9% | ||
| Interest Coverage | 12.81 | ||
| Cash Conversion | 81.87% | ||
| Profit Quality | 106.67% | ||
| Current Ratio | 1 | ||
| Quick Ratio | 1 | ||
| Altman-Z | 2.4 |
F-Score6
WACC9.14%
ROIC/WACC4.52
Cap/Depr(3y)103.92%
Cap/Depr(5y)107.85%
Cap/Sales(3y)3.15%
Cap/Sales(5y)3.41%
Profit Quality(3y)96.23%
Profit Quality(5y)97.19%
High Growth Momentum
Growth
EPS 1Y (TTM)11.95%
EPS 3Y15.1%
EPS 5Y10.99%
EPS Q2Q%10.33%
EPS Next Y9.38%
EPS Next 2Y9.34%
EPS Next 3Y9.37%
EPS Next 5Y7.54%
Revenue 1Y (TTM)7.09%
Revenue growth 3Y8.57%
Revenue growth 5Y6.36%
Sales Q2Q%8.15%
Revenue Next Year6.57%
Revenue Next 2Y6.1%
Revenue Next 3Y5.9%
Revenue Next 5Y4.79%
EBIT growth 1Y11.88%
EBIT growth 3Y14.48%
EBIT growth 5Y10.53%
EBIT Next Year19.76%
EBIT Next 3Y11.11%
EBIT Next 5Y9.85%
FCF growth 1Y43.14%
FCF growth 3Y11.58%
FCF growth 5Y11.12%
OCF growth 1Y36.32%
OCF growth 3Y10.36%
OCF growth 5Y9.11%