AUTOMATIC DATA PROCESSING (ADP) Stock Fundamental Analysis
NASDAQ:ADP - Nasdaq - US0530151036 - Common Stock - Currency: USD
Taking everything into account, ADP scores 6 out of 10 in our fundamental rating. ADP was compared to 82 industry peers in the Professional Services industry. ADP has outstanding health and profitabily ratings, belonging to the best of the industry. This is a solid base for any company. 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.
Each year in the past 5 years ADP had a positive operating cash flow.
1.2 Ratios
ADP has a better Return On Assets (7.08%) than 70.73% of its industry peers.
Looking at the Return On Equity, with a value of 68.29%, ADP belongs to the top of the industry, outperforming 93.90% of the companies in the same industry.
With an excellent Return On Invested Capital value of 35.47%, ADP belongs to the best of the industry, outperforming 98.78% of the companies in the same industry.
Measured over the past 3 years, the Average Return On Invested Capital for ADP is significantly above the industry average of 12.27%.
The last Return On Invested Capital (35.47%) for ADP is well below the 3 year average (40.21%), which needs to be investigated, but indicates that ADP had better years and this may not be a problem.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 7.08% | ||
| ROE | 68.29% | ||
| ROIC | 35.47% |
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
ADP has a Profit Margin of 19.79%. This is amongst the best in the industry. ADP outperforms 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 26.48%, ADP belongs to the best of the industry, outperforming 91.46% 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 47.34%. This is in the better half of the industry: ADP outperforms 62.20% of its industry peers.
In the last couple of years the Gross Margin of ADP has remained more or less at the same level.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 26.48% | ||
| PM (TTM) | 19.79% | ||
| GM | 47.34% |
OM growth 3Y5.45%
OM growth 5Y3.92%
PM growth 3Y4.11%
PM growth 5Y3.76%
GM growth 3Y2.33%
GM growth 5Y1.05%
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.
Compared to 1 year ago, ADP has less shares outstanding
Compared to 5 years ago, ADP has less shares outstanding
The debt/assets ratio for ADP has been reduced compared to a year ago.
2.2 Solvency
ADP has an Altman-Z score of 2.78. 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 (2.78) which is comparable to the rest of the industry.
ADP has a debt to FCF ratio of 0.94. This is a very positive value and a sign of high solvency as it would only need 0.94 years to pay back of all of its debts.
The Debt to FCF ratio of ADP (0.94) is better than 80.49% of its industry peers.
A Debt/Equity ratio of 0.68 indicates that ADP is somewhat dependend on debt financing.
ADP has a Debt to Equity ratio (0.68) which is comparable to the rest of the industry.
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 | 0.68 | ||
| Debt/FCF | 0.94 | ||
| Altman-Z | 2.78 |
ROIC/WACC3.95
WACC8.99%
2.3 Liquidity
ADP has a Current Ratio of 1.02. 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 (1.02) than 75.61% of its industry peers.
ADP has a Quick Ratio of 1.02. 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 1.02, ADP is not doing good in the industry: 75.61% of the companies in the same industry are doing better.
ADP does not score too well on the current and quick ratio evaluation. However, as it has excellent solvency and profitability, these ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.02 | ||
| Quick Ratio | 1.02 |
3. Growth
3.1 Past
ADP shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 9.47%, which is quite good.
The Earnings Per Share has been growing by 10.99% on average over the past years. This is quite good.
ADP shows a small growth in Revenue. In the last year, the Revenue has grown by 6.82%.
ADP shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 6.36% yearly.
EPS 1Y (TTM)9.47%
EPS 3Y15.1%
EPS 5Y10.99%
EPS Q2Q%6.25%
Revenue 1Y (TTM)6.82%
Revenue growth 3Y8.57%
Revenue growth 5Y6.36%
Sales Q2Q%5.69%
3.2 Future
Based on estimates for the next years, ADP will show a quite strong growth in Earnings Per Share. The EPS will grow by 8.73% on average per year.
The Revenue is expected to grow by 6.37% on average over the next years.
EPS Next Y9.77%
EPS Next 2Y9.44%
EPS Next 3Y9.29%
EPS Next 5Y8.73%
Revenue Next Year6.8%
Revenue Next 2Y6.24%
Revenue Next 3Y6.03%
Revenue Next 5Y6.37%
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 stable: in the next years the growth will be about the same than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
ADP is valuated quite expensively with a Price/Earnings ratio of 30.79.
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 27.30, which is the current average of the S&P500 Index.
ADP is valuated quite expensively with a Price/Forward Earnings ratio of 27.53.
ADP's Price/Forward Earnings ratio is in line with the industry average.
Compared to an average S&P500 Price/Forward Earnings ratio of 21.76, ADP is valued a bit more expensive.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 30.79 | ||
| Fwd PE | 27.53 |
4.2 Price Multiples
ADP's Enterprise Value to EBITDA ratio is in line with the industry average.
ADP's Price/Free Cash Flow ratio is in line with the industry average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 28.95 | ||
| EV/EBITDA | 21.02 |
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)3.15
PEG (5Y)2.8
EPS Next 2Y9.44%
EPS Next 3Y9.29%
5. Dividend
5.1 Amount
ADP has a Yearly Dividend Yield of 1.99%.
Compared to an average industry Dividend Yield of 2.06, ADP pays a better dividend. On top of this ADP pays more dividend than 82.93% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.37, ADP has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.99% |
5.2 History
On average, the dividend of ADP grows each year by 12.44%, which is quite nice.
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 58.73% 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.
DP58.73%
EPS Next 2Y9.44%
EPS Next 3Y9.29%
302.65
-3.17 (-1.04%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners84.68%
Inst Owner Change0%
Ins Owners0.11%
Ins Owner Change-0.6%
Market Cap122.85B
Analysts67.62
Price Target321.89 (6.36%)
Short Float %1.22%
Short Ratio2.92
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.99% |
Yearly Dividend5.32
Dividend Growth(5Y)12.44%
DP58.73%
Div Incr Years26
Div Non Decr Years26
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)1.67%
Min EPS beat(2)1.48%
Max EPS beat(2)1.85%
EPS beat(4)4
Avg EPS beat(4)2.11%
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)1.81%
EPS beat(16)16
Avg EPS beat(16)2.58%
Revenue beat(2)2
Avg Revenue beat(2)0.34%
Min Revenue beat(2)0.11%
Max Revenue beat(2)0.57%
Revenue beat(4)3
Avg Revenue beat(4)0.11%
Min Revenue beat(4)-0.45%
Max Revenue beat(4)0.57%
Revenue beat(8)4
Avg Revenue beat(8)-0.1%
Revenue beat(12)7
Avg Revenue beat(12)-0.03%
Revenue beat(16)11
Avg Revenue beat(16)0.12%
PT rev (1m)1.66%
PT rev (3m)1.54%
EPS NQ rev (1m)0%
EPS NQ rev (3m)-2.36%
EPS NY rev (1m)0%
EPS NY rev (3m)0.38%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)-0.25%
Revenue NY rev (1m)0.01%
Revenue NY rev (3m)0.21%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 30.79 | ||
| Fwd PE | 27.53 | ||
| P/S | 6.08 | ||
| P/FCF | 28.95 | ||
| P/OCF | 25.59 | ||
| P/B | 20.98 | ||
| P/tB | 129.21 | ||
| EV/EBITDA | 21.02 |
EPS(TTM)9.83
EY3.25%
EPS(NY)10.99
Fwd EY3.63%
FCF(TTM)10.45
FCFY3.45%
OCF(TTM)11.83
OCFY3.91%
SpS49.77
BVpS14.42
TBVpS2.34
PEG (NY)3.15
PEG (5Y)2.8
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 7.08% | ||
| ROE | 68.29% | ||
| ROCE | 50.44% | ||
| ROIC | 35.47% | ||
| ROICexc | 46.12% | ||
| ROICexgc | 102.41% | ||
| OM | 26.48% | ||
| PM (TTM) | 19.79% | ||
| GM | 47.34% | ||
| FCFM | 21% |
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)138.4%
ROICexgc(5y)107.71%
ROCE(3y)52.26%
ROCE(5y)44.53%
ROICexcg growth 3Y43.74%
ROICexcg growth 5Y22.92%
ROICexc growth 3Y26.6%
ROICexc growth 5Y15.01%
OM growth 3Y5.45%
OM growth 5Y3.92%
PM growth 3Y4.11%
PM growth 5Y3.76%
GM growth 3Y2.33%
GM growth 5Y1.05%
F-Score8
Asset Turnover0.36
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.68 | ||
| Debt/FCF | 0.94 | ||
| Debt/EBITDA | 0.67 | ||
| Cap/Depr | 97.47% | ||
| Cap/Sales | 2.76% | ||
| Interest Coverage | 12.36 | ||
| Cash Conversion | 81.08% | ||
| Profit Quality | 106.13% | ||
| Current Ratio | 1.02 | ||
| Quick Ratio | 1.02 | ||
| Altman-Z | 2.78 |
F-Score8
WACC8.99%
ROIC/WACC3.95
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)9.47%
EPS 3Y15.1%
EPS 5Y10.99%
EPS Q2Q%6.25%
EPS Next Y9.77%
EPS Next 2Y9.44%
EPS Next 3Y9.29%
EPS Next 5Y8.73%
Revenue 1Y (TTM)6.82%
Revenue growth 3Y8.57%
Revenue growth 5Y6.36%
Sales Q2Q%5.69%
Revenue Next Year6.8%
Revenue Next 2Y6.24%
Revenue Next 3Y6.03%
Revenue Next 5Y6.37%
EBIT growth 1Y9.59%
EBIT growth 3Y14.49%
EBIT growth 5Y10.53%
EBIT Next Year19.92%
EBIT Next 3Y10.81%
EBIT Next 5Y11.23%
FCF growth 1Y26.29%
FCF growth 3Y11.58%
FCF growth 5Y11.12%
OCF growth 1Y22.02%
OCF growth 3Y10.36%
OCF growth 5Y9.11%