AUTOMATIC DATA PROCESSING (ADP) Stock Fundamental Analysis
USA - NASDAQ:ADP - US0530151036 - Common Stock
281.27 USD
+1.11 (+0.4%)
281.27 USD
0 (0%)
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 belongs to the best of the industry regarding profitability, there are some minor concerns on its financial health. ADP is quite expensive at the moment. It does show a decent growth rate.
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.
In the past 5 years ADP has always 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 (7.64%) than 74.39% 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 93.90% of its industry peers.
ADP had an Average Return On Invested Capital over the past 3 years of 36.13%. This is significantly above the industry average of 13.40%.
The 3 year average ROIC (36.13%) for ADP is well above the current ROIC(24.78%). The reason for the recent decline needs to be investigated.
| 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
ADP has a better Profit Margin (19.84%) than 90.24% of its industry peers.
ADP's Profit Margin has improved in the last couple of years.
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's Gross Margin of 47.37% is fine compared to the rest of the industry. ADP outperforms 60.98% of its industry peers.
In the last couple of years the Gross Margin of ADP has grown nicely.
| 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
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 a worse debt to assets ratio.
2.2 Solvency
ADP has an Altman-Z score of 2.87. 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.
Looking at the Altman-Z score, with a value of 2.87, ADP is in line with its industry, outperforming 48.78% of the companies in the same industry.
ADP has a debt to FCF ratio of 1.99. This is a very positive value and a sign of high solvency as it would only need 1.99 years to pay back of all of its debts.
The Debt to FCF ratio of ADP (1.99) is better than 67.07% 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.
ADP has a worse Debt to Equity ratio (1.41) than 80.49% of its industry peers.
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 | 2.87 |
ROIC/WACC2.92
WACC8.48%
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.
ADP has a worse Current ratio (1.05) than 71.95% 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.
With a Quick ratio value of 1.05, ADP is not doing good in the industry: 71.95% of the companies in the same industry are doing better.
| 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.
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.
The Revenue has been growing slightly by 7.07% in the past 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.
ADP is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 5.65% yearly.
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 3Y5.87%
Revenue Next 5Y5.65%
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
The Price/Earnings ratio is 28.13, which means the current valuation is very expensive for ADP.
ADP's Price/Earnings ratio is in line with the industry average.
ADP is valuated at similar levels of the S&P average when we compare the Price/Earnings ratio to 27.40, which is the current average of the S&P500 Index.
With a Price/Forward Earnings ratio of 25.50, ADP can be considered very expensive at the moment.
The rest of the industry has a similar Price/Forward Earnings ratio as ADP.
When comparing the Price/Forward Earnings ratio of ADP to the average of the S&P500 Index (22.94), we can say ADP is valued inline with the index average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 28.13 | ||
| Fwd PE | 25.5 |
4.2 Price Multiples
The rest of the industry has a similar Enterprise Value to EBITDA ratio as ADP.
The rest of the industry has a similar Price/Free Cash Flow ratio as ADP.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 25.94 | ||
| EV/EBITDA | 17.48 |
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)2.73
PEG (5Y)2.54
EPS Next 2Y9.86%
EPS Next 3Y9.6%
5. Dividend
5.1 Amount
ADP has a Yearly Dividend Yield of 2.15%. Purely for dividend investing, there may be better candidates out there.
ADP's Dividend Yield is rather good when compared to the industry average which is at 3.90. ADP pays more dividend than 84.15% of the companies 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 | 2.15% |
5.2 History
The dividend of ADP is nicely growing with an annual growth rate of 11.62%!
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%
281.27
+1.11 (+0.4%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners85.24%
Inst Owner Change0.12%
Ins Owners0.12%
Ins Owner Change1.97%
Market Cap113.94B
Analysts67
Price Target322.81 (14.77%)
Short Float %1.76%
Short Ratio4.22
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.15% |
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)-0.71%
PT rev (3m)0.28%
EPS NQ rev (1m)0%
EPS NQ rev (3m)-3.19%
EPS NY rev (1m)0%
EPS NY rev (3m)0.36%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)0.72%
Revenue NY rev (1m)0%
Revenue NY rev (3m)0.52%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 28.13 | ||
| Fwd PE | 25.5 | ||
| P/S | 5.54 | ||
| P/FCF | 25.94 | ||
| P/OCF | 23.07 | ||
| P/B | 18.41 | ||
| P/tB | 86.88 | ||
| EV/EBITDA | 17.48 |
EPS(TTM)10
EY3.56%
EPS(NY)11.03
Fwd EY3.92%
FCF(TTM)10.84
FCFY3.86%
OCF(TTM)12.19
OCFY4.34%
SpS50.76
BVpS15.28
TBVpS3.24
PEG (NY)2.73
PEG (5Y)2.54
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 | 2.87 |
F-Score8
WACC8.48%
ROIC/WACC2.92
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 3Y5.87%
Revenue Next 5Y5.65%
EBIT growth 1Y8.87%
EBIT growth 3Y12.61%
EBIT growth 5Y11.57%
EBIT Next Year19.43%
EBIT Next 3Y11.26%
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%