257.87 USD
-1.99 (-0.76%)
256.91 USD
-0.96 (-0.37%)
We assign a fundamental rating of 6 out of 10 to ADP. ADP was compared to 88 industry peers in the Professional Services industry. While ADP belongs to the best of the industry regarding profitability, there are some minor concerns on its financial health. ADP does not seem to be growing, but still is valued expensively. ADP also has an excellent dividend rating. These ratings could make ADP a good candidate for dividend investing.
1. Profitability
1.1 Basic Checks
- In the past year ADP was profitable.
- In the past year ADP had a positive cash flow from operations.
- Each year in the past 5 years ADP has been profitable.
- In the past 5 years ADP always reported a positive cash flow from operatings.
1.2 Ratios
- ADP has a better Return On Assets (7.61%) than 73.86% of its industry peers.
- ADP's Return On Equity of 64.90% is amongst the best of the industry. ADP outperforms 95.45% of its industry peers.
- ADP has a better Return On Invested Capital (24.00%) than 93.18% 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 11.85%.
- The 3 year average ROIC (36.13%) for ADP is well above the current ROIC(24.00%). The reason for the recent decline needs to be investigated.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 7.61% | ||
| ROE | 64.9% | ||
| ROIC | 24% |
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
- ADP has a Profit Margin of 19.79%. This is amongst the best in the industry. ADP outperforms 87.50% of its industry peers.
- ADP's Profit Margin has improved in the last couple of years.
- ADP has a better Operating Margin (26.27%) than 92.05% of its industry peers.
- ADP's Operating Margin has improved in the last couple of years.
- With a decent Gross Margin value of 47.26%, ADP is doing good in the industry, outperforming 63.64% of the companies in the same industry.
- ADP's Gross Margin has improved in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 26.27% | ||
| PM (TTM) | 19.79% | ||
| GM | 47.26% |
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.
- The number of shares outstanding for ADP has been reduced compared to 5 years ago.
- ADP has a worse debt/assets ratio than last year.
2.2 Solvency
- An Altman-Z score of 2.74 indicates that ADP is not a great score, but indicates only limited risk for bankruptcy at the moment.
- Looking at the Altman-Z score, with a value of 2.74, ADP is in line with its industry, outperforming 51.14% of the companies in the same industry.
- The Debt to FCF ratio of ADP is 2.18, which is a good value as it means it would take ADP, 2.18 years of fcf income to pay off all of its debts.
- Looking at the Debt to FCF ratio, with a value of 2.18, ADP is in the better half of the industry, outperforming 71.59% of the companies in the same industry.
- A Debt/Equity ratio of 1.44 is on the high side and indicates that ADP has dependencies on debt financing.
- ADP's Debt to Equity ratio of 1.44 is on the low side compared to the rest of the industry. ADP is outperformed by 73.86% 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 | 1.44 | ||
| Debt/FCF | 2.18 | ||
| Altman-Z | 2.74 |
ROIC/WACC2.76
WACC8.7%
2.3 Liquidity
- A Current Ratio of 1.05 indicates that ADP should not have too much problems paying its short term obligations.
- The Current ratio of ADP (1.05) is worse than 71.59% of its industry peers.
- ADP has a Quick 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.
- The Quick ratio of ADP (1.05) is worse than 71.59% 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 been growing slightly by 7.74% 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 11.05% on average per year.
- ADP shows a small growth in Revenue. In the last year, the Revenue has grown by 7.07%.
- Measured over the past years, ADP shows a small growth in Revenue. The Revenue has been growing by 7.10% on average per year.
EPS 1Y (TTM)7.74%
EPS 3Y12.57%
EPS 5Y11.05%
EPS Q2Q%6.87%
Revenue 1Y (TTM)7.07%
Revenue growth 3Y7.61%
Revenue growth 5Y7.1%
Sales Q2Q%7.09%
3.2 Future
- The Earnings Per Share is expected to grow by 7.91% on average over the next years.
- Based on estimates for the next years, ADP will show a small growth in Revenue. The Revenue will grow by 5.68% on average per year.
EPS Next Y10.23%
EPS Next 2Y9.84%
EPS Next 3Y9.55%
EPS Next 5Y7.91%
Revenue Next Year6.24%
Revenue Next 2Y6.01%
Revenue Next 3Y5.97%
Revenue Next 5Y5.68%
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
- With a Price/Earnings ratio of 25.38, ADP can be considered very expensive at the moment.
- The rest of the industry has a similar Price/Earnings ratio as ADP.
- ADP's Price/Earnings ratio indicates a similar valuation than the S&P500 average which is at 27.21.
- With a Price/Forward Earnings ratio of 21.38, ADP is valued on the expensive side.
- Compared to the rest of the industry, the Price/Forward Earnings ratio of ADP is on the same level as its industry peers.
- The average S&P500 Price/Forward Earnings ratio is at 24.26. ADP is around the same levels.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 25.38 | ||
| Fwd PE | 21.38 |
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.
- Based on the Price/Free Cash Flow ratio, ADP is valued a bit cheaper than the industry average as 64.77% of the companies are valued more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 24.78 | ||
| EV/EBITDA | 15.73 |
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.
- ADP has an outstanding profitability rating, which may justify a higher PE ratio.
PEG (NY)2.48
PEG (5Y)2.3
EPS Next 2Y9.84%
EPS Next 3Y9.55%
5. Dividend
5.1 Amount
- ADP has a Yearly Dividend Yield of 2.62%. Purely for dividend investing, there may be better candidates out there.
- Compared to an average industry Dividend Yield of 1.43, ADP pays a better dividend. On top of this ADP pays more dividend than 86.36% of the companies listed in the same industry.
- Compared to an average S&P500 Dividend Yield of 1.81, ADP pays a bit more dividend than the S&P500 average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.62% |
5.2 History
- The dividend of ADP is nicely growing with an annual growth rate of 11.62%!
- ADP has paid a dividend for at least 10 years, which is a reliable track record.
- ADP has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
Dividend Growth(5Y)11.62%
Div Incr Years26
Div Non Decr Years26
5.3 Sustainability
- ADP pays out 59.30% of its income as dividend. 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.
DP59.3%
EPS Next 2Y9.84%
EPS Next 3Y9.55%
AUTOMATIC DATA PROCESSING / ADP FAQ
Can you provide the ChartMill fundamental rating for AUTOMATIC DATA PROCESSING?
ChartMill assigns a fundamental rating of 6 / 10 to ADP.
What is the valuation status for ADP stock?
ChartMill assigns a valuation rating of 3 / 10 to AUTOMATIC DATA PROCESSING (ADP). This can be considered as Overvalued.
What is the profitability of ADP stock?
AUTOMATIC DATA PROCESSING (ADP) has a profitability rating of 9 / 10.
Can you provide the expected EPS growth for ADP stock?
The Earnings per Share (EPS) of AUTOMATIC DATA PROCESSING (ADP) is expected to grow by 10.23% in the next year.
Is the dividend of AUTOMATIC DATA PROCESSING sustainable?
The dividend rating of AUTOMATIC DATA PROCESSING (ADP) is 7 / 10 and the dividend payout ratio is 59.3%.