AUTOMATIC DATA PROCESSING (ADP) Stock Fundamental Analysis
USA - NASDAQ:ADP - US0530151036 - Common Stock
290.87 USD
-2.63 (-0.9%)
291 USD
+0.13 (+0.04%)
Overall ADP gets a fundamental rating of 6 out of 10. We evaluated ADP against 82 industry peers in the Professional Services industry. ADP scores excellent on profitability, but 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
In the past year ADP was profitable.
ADP had a positive operating cash flow in the past year.
In the past 5 years ADP has always 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 7.64% is fine compared to the rest of the industry. ADP outperforms 75.61% of its industry peers.
ADP has a better Return On Equity (65.93%) than 93.90% of its industry peers.
ADP has a better Return On Invested Capital (24.78%) than 95.12% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for ADP is significantly above the industry average of 12.76%.
The last Return On Invested Capital (24.78%) for ADP is well below the 3 year average (36.13%), which needs to be investigated, but indicates that ADP had better years and this may not be a problem.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 7.64% | ||
| ROE | 65.93% | ||
| ROIC | 24.78% |
ROA(3y)7.08%
ROA(5y)6.25%
ROE(3y)81.89%
ROE(5y)76.59%
ROIC(3y)36.13%
ROIC(5y)33.86%
1.3 Margins
Looking at the Profit Margin, with a value of 19.84%, ADP belongs to the top of the industry, outperforming 90.24% of the companies in the same industry.
In the last couple of years the Profit Margin of ADP has grown nicely.
With an excellent Operating Margin value of 26.42%, ADP belongs to the best of the industry, outperforming 92.68% of the companies in the same industry.
In the last couple of years the Operating Margin of ADP has grown nicely.
ADP has a Gross Margin of 47.37%. This is in the better half of the industry: ADP outperforms 62.20% of its industry peers.
ADP's Gross Margin has improved in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 26.42% | ||
| PM (TTM) | 19.84% | ||
| GM | 47.37% |
OM growth 3Y4.64%
OM growth 5Y4.17%
PM growth 3Y3.54%
PM growth 5Y3.25%
GM growth 3Y2.58%
GM growth 5Y1.81%
2. Health
2.1 Basic Checks
The Return on Invested Capital (ROIC) is well above the Cost of Capital (WACC), so ADP is creating value.
The number of shares outstanding for ADP has been reduced compared to 1 year ago.
Compared to 5 years ago, ADP has less shares outstanding
The debt/assets ratio for ADP is higher compared to a year ago.
2.2 Solvency
An Altman-Z score of 2.93 indicates that ADP is not a great score, but indicates only limited risk for bankruptcy at the moment.
ADP has a Altman-Z score of 2.93. This is comparable to the rest of the industry: ADP outperforms 52.44% of its industry peers.
The Debt to FCF ratio of ADP is 1.99, which is an excellent value as it means it would take ADP, only 1.99 years of fcf income to pay off all of its debts.
The Debt to FCF ratio of ADP (1.99) is better than 65.85% of its industry peers.
A Debt/Equity ratio of 1.41 is on the high side and indicates that ADP has dependencies on debt financing.
With a Debt to Equity ratio value of 1.41, ADP is not doing good in the industry: 79.27% of the companies in the same industry are doing better.
Although ADP does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 1.41 | ||
| Debt/FCF | 1.99 | ||
| Altman-Z | 2.93 |
ROIC/WACC2.9
WACC8.55%
2.3 Liquidity
ADP has a Current Ratio of 1.05. This is a normal value and indicates that ADP is financially healthy and should not expect problems in meeting its short term obligations.
Looking at the Current ratio, with a value of 1.05, ADP is doing worse than 70.73% of the companies in the same industry.
A Quick Ratio of 1.05 indicates that ADP should not have too much problems paying its short term obligations.
The Quick ratio of ADP (1.05) is worse than 70.73% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.05 | ||
| Quick Ratio | 1.05 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an nice 8.93% over the past year.
The Earnings Per Share has been growing by 11.05% on average over the past years. This is quite good.
Looking at the last year, ADP shows a small growth in Revenue. The Revenue has grown by 7.07% in the last year.
The Revenue has been growing slightly by 7.10% on average over the past years.
EPS 1Y (TTM)8.93%
EPS 3Y12.57%
EPS 5Y11.05%
EPS Q2Q%8.13%
Revenue 1Y (TTM)7.07%
Revenue growth 3Y7.61%
Revenue growth 5Y7.1%
Sales Q2Q%7.51%
3.2 Future
Based on estimates for the next years, ADP will show a small growth in Earnings Per Share. The EPS will grow by 7.85% on average per year.
Based on estimates for the next years, ADP will show a small growth in Revenue. The Revenue will grow by 5.65% on average per year.
EPS Next Y10.3%
EPS Next 2Y9.86%
EPS Next 3Y9.6%
EPS Next 5Y7.85%
Revenue Next Year6.2%
Revenue Next 2Y5.95%
Revenue Next 3Y5.91%
Revenue Next 5Y5.65%
3.3 Evolution
The EPS growth rate is decreasing: in the next years the growth will be less than in the last years.
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
The Price/Earnings ratio is 29.09, which means the current valuation is very expensive for ADP.
The rest of the industry has a similar Price/Earnings ratio as ADP.
ADP is valuated at similar levels of the S&P average when we compare the Price/Earnings ratio to 27.27, which is the current average of the S&P500 Index.
ADP is valuated quite expensively with a Price/Forward Earnings ratio of 26.37.
ADP's Price/Forward Earnings is on the same level as the industry average.
The average S&P500 Price/Forward Earnings ratio is at 22.77. ADP is around the same levels.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 29.09 | ||
| Fwd PE | 26.37 |
4.2 Price Multiples
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of ADP is on the same level as its industry peers.
The rest of the industry has a similar Price/Free Cash Flow ratio as ADP.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 26.82 | ||
| EV/EBITDA | 18.2 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates ADP does not grow enough to justify the current Price/Earnings ratio.
The excellent profitability rating of ADP may justify a higher PE ratio.
PEG (NY)2.82
PEG (5Y)2.63
EPS Next 2Y9.86%
EPS Next 3Y9.6%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 2.07%, ADP has a reasonable but not impressive dividend return.
Compared to an average industry Dividend Yield of 2.07, ADP pays a better dividend. On top of this ADP pays more dividend than 85.37% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.38, ADP has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.07% |
5.2 History
On average, the dividend of ADP grows each year by 11.62%, which is quite nice.
ADP has been paying a dividend for at least 10 years, so it has a reliable track record.
ADP has not decreased their dividend for at least 10 years, which is a reliable track record.
Dividend Growth(5Y)11.62%
Div Incr Years26
Div Non Decr Years26
5.3 Sustainability
58.80% of the earnings are spent on dividend by ADP. This is a bit on the high side, but may be sustainable.
ADP's earnings are growing slower than its dividend. This means the dividend growth is not sustainable.
DP58.8%
EPS Next 2Y9.86%
EPS Next 3Y9.6%
290.87
-2.63 (-0.9%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners85.28%
Inst Owner Change-0.12%
Ins Owners0.11%
Ins Owner Change2.18%
Market Cap117.81B
Analysts67
Price Target325.13 (11.78%)
Short Float %1.58%
Short Ratio4.3
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.07% |
Yearly Dividend5.9
Dividend Growth(5Y)11.62%
DP58.8%
Div Incr Years26
Div Non Decr Years26
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)1.1%
Min EPS beat(2)0.35%
Max EPS beat(2)1.85%
EPS beat(4)4
Avg EPS beat(4)2.06%
Min EPS beat(4)0.35%
Max EPS beat(4)4.53%
EPS beat(8)8
Avg EPS beat(8)1.67%
EPS beat(12)12
Avg EPS beat(12)1.7%
EPS beat(16)16
Avg EPS beat(16)2.33%
Revenue beat(2)2
Avg Revenue beat(2)0.38%
Min Revenue beat(2)0.11%
Max Revenue beat(2)0.64%
Revenue beat(4)4
Avg Revenue beat(4)0.38%
Min Revenue beat(4)0.11%
Max Revenue beat(4)0.64%
Revenue beat(8)4
Avg Revenue beat(8)-0.16%
Revenue beat(12)7
Avg Revenue beat(12)-0.04%
Revenue beat(16)11
Avg Revenue beat(16)0.12%
PT rev (1m)-0.37%
PT rev (3m)1.67%
EPS NQ rev (1m)-0.02%
EPS NQ rev (3m)-2.83%
EPS NY rev (1m)0.36%
EPS NY rev (3m)0.48%
Revenue NQ rev (1m)0.04%
Revenue NQ rev (3m)0.72%
Revenue NY rev (1m)0.51%
Revenue NY rev (3m)0.57%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 29.09 | ||
| Fwd PE | 26.37 | ||
| P/S | 5.73 | ||
| P/FCF | 26.82 | ||
| P/OCF | 23.85 | ||
| P/B | 19.04 | ||
| P/tB | 89.83 | ||
| EV/EBITDA | 18.2 |
EPS(TTM)10
EY3.44%
EPS(NY)11.03
Fwd EY3.79%
FCF(TTM)10.85
FCFY3.73%
OCF(TTM)12.2
OCFY4.19%
SpS50.76
BVpS15.28
TBVpS3.24
PEG (NY)2.82
PEG (5Y)2.63
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 7.64% | ||
| ROE | 65.93% | ||
| ROCE | 44.92% | ||
| ROIC | 24.78% | ||
| ROICexc | 46.35% | ||
| ROICexgc | 100.97% | ||
| OM | 26.42% | ||
| PM (TTM) | 19.84% | ||
| GM | 47.37% | ||
| FCFM | 21.36% |
ROA(3y)7.08%
ROA(5y)6.25%
ROE(3y)81.89%
ROE(5y)76.59%
ROIC(3y)36.13%
ROIC(5y)33.86%
ROICexc(3y)55.75%
ROICexc(5y)48.87%
ROICexgc(3y)137.09%
ROICexgc(5y)114.46%
ROCE(3y)51.2%
ROCE(5y)46.57%
ROICexcg growth 3Y-1.22%
ROICexcg growth 5Y8.54%
ROICexc growth 3Y0.6%
ROICexc growth 5Y6.46%
OM growth 3Y4.64%
OM growth 5Y4.17%
PM growth 3Y3.54%
PM growth 5Y3.25%
GM growth 3Y2.58%
GM growth 5Y1.81%
F-Score8
Asset Turnover0.39
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 1.41 | ||
| Debt/FCF | 1.99 | ||
| Debt/EBITDA | 1.45 | ||
| Cap/Depr | 93.92% | ||
| Cap/Sales | 2.66% | ||
| Interest Coverage | 12.73 | ||
| Cash Conversion | 82.14% | ||
| Profit Quality | 107.67% | ||
| Current Ratio | 1.05 | ||
| Quick Ratio | 1.05 | ||
| Altman-Z | 2.93 |
F-Score8
WACC8.55%
ROIC/WACC2.9
Cap/Depr(3y)99.42%
Cap/Depr(5y)100.95%
Cap/Sales(3y)2.92%
Cap/Sales(5y)3.1%
Profit Quality(3y)103.34%
Profit Quality(5y)99.19%
High Growth Momentum
Growth
EPS 1Y (TTM)8.93%
EPS 3Y12.57%
EPS 5Y11.05%
EPS Q2Q%8.13%
EPS Next Y10.3%
EPS Next 2Y9.86%
EPS Next 3Y9.6%
EPS Next 5Y7.85%
Revenue 1Y (TTM)7.07%
Revenue growth 3Y7.61%
Revenue growth 5Y7.1%
Sales Q2Q%7.51%
Revenue Next Year6.2%
Revenue Next 2Y5.95%
Revenue Next 3Y5.91%
Revenue Next 5Y5.65%
EBIT growth 1Y8.87%
EBIT growth 3Y12.61%
EBIT growth 5Y11.57%
EBIT Next Year18.77%
EBIT Next 3Y11.41%
EBIT Next 5Y10.37%
FCF growth 1Y22.22%
FCF growth 3Y19.94%
FCF growth 5Y12.76%
OCF growth 1Y18.81%
OCF growth 3Y16.81%
OCF growth 5Y10.3%