AUTOMATIC DATA PROCESSING (ADP)
US0530151036 - Common Stock
We assign a fundamental rating of 6 out of 10 to ADP. ADP was compared to 81 industry peers in the Professional Services industry. ADP scores excellent on profitability, but there are some minor concerns on its financial health. ADP is valied quite expensively at the moment, while it does show a decent growth rate.
1. Profitability
1.1 Basic Checks
In the past year ADP was profitable.
ADP had a positive operating cash flow in the past year.
Each year in the past 5 years ADP has been profitable.
ADP had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
Looking at the Return On Assets, with a value of 7.77%, ADP is in the better half of the industry, outperforming 72.73% of the companies in the same industry.
ADP has a better Return On Equity (71.96%) than 94.81% of its industry peers.
With an excellent Return On Invested Capital value of 27.27%, ADP belongs to the best of the industry, outperforming 93.51% of the companies in the same industry.
ADP had an Average Return On Invested Capital over the past 3 years of 40.21%. This is significantly above the industry average of 17.86%.
The 3 year average ROIC (40.21%) for ADP is well above the current ROIC(27.27%). The reason for the recent decline needs to be investigated.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 7.77% | ||
| ROE | 71.96% | ||
| ROIC | 27.27% |
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 19.71%, ADP belongs to the top of the industry, outperforming 90.91% of the companies in the same industry.
ADP's Profit Margin has improved in the last couple of years.
ADP has a better Operating Margin (26.35%) than 88.31% of its industry peers.
In the last couple of years the Operating Margin of ADP has grown nicely.
ADP has a Gross Margin of 45.91%. This is comparable to the rest of the industry: ADP outperforms 54.55% 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 | 26.35% | ||
| PM (TTM) | 19.71% | ||
| GM | 45.91% |
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
With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), ADP is creating value.
Compared to 1 year ago, ADP has less shares outstanding
Compared to 5 years ago, ADP has less shares outstanding
Compared to 1 year ago, ADP has an improved debt to assets ratio.
2.2 Solvency
An Altman-Z score of 3.06 indicates that ADP is not in any danger for bankruptcy at the moment.
With a Altman-Z score value of 3.06, ADP perfoms like the industry average, outperforming 48.05% of the companies in the same industry.
ADP has a debt to FCF ratio of 2.05. This is a good value and a sign of high solvency as ADP would need 2.05 years to pay back of all of its debts.
The Debt to FCF ratio of ADP (2.05) is better than 72.73% of its industry peers.
A Debt/Equity ratio of 1.38 is on the high side and indicates that ADP has dependencies on debt financing.
ADP has a worse Debt to Equity ratio (1.38) than 81.82% 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 | 1.38 | ||
| Debt/FCF | 2.05 | ||
| Altman-Z | 3.06 |
ROIC/WACC2.87
WACC9.49%
2.3 Liquidity
ADP has a Current Ratio of 1.01. 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 Current ratio of 1.01. This is in the lower half of the industry: ADP underperforms 72.73% of its industry peers.
ADP has a Quick Ratio of 1.01. This is a normal value and indicates that ADP is financially healthy and should not expect problems in meeting its short term obligations.
ADP's Quick ratio of 1.01 is on the low side compared to the rest of the industry. ADP is outperformed by 72.73% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.01 | ||
| Quick Ratio | 1.01 |
3. Growth
3.1 Past
ADP shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 11.60%, 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 6.63%.
ADP shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 6.36% yearly.
EPS 1Y (TTM)11.6%
EPS 3Y15.1%
EPS 5Y10.99%
EPS Q2Q%12.02%
Revenue 1Y (TTM)6.63%
Revenue growth 3Y8.57%
Revenue growth 5Y6.36%
Sales Q2Q%7.1%
3.2 Future
The Earnings Per Share is expected to grow by 7.63% on average over the next years.
The Revenue is expected to grow by 4.98% on average over the next years.
EPS Next Y9.5%
EPS Next 2Y9.38%
EPS Next 3Y9.07%
EPS Next 5Y7.63%
Revenue Next Year6.35%
Revenue Next 2Y5.98%
Revenue Next 3Y5.76%
Revenue Next 5Y4.98%
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 31.18, ADP can be considered very expensive at the moment.
Based on the Price/Earnings ratio, ADP is valued a bit more expensive than the industry average as 63.64% of the companies are valued more cheaply.
The average S&P500 Price/Earnings ratio is at 27.20. ADP is around the same levels.
Based on the Price/Forward Earnings ratio of 26.77, the valuation of ADP can be described as expensive.
ADP's Price/Forward Earnings is on the same level as the industry average.
ADP's Price/Forward Earnings ratio indicates a similar valuation than the S&P500 average which is at 23.73.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 31.18 | ||
| Fwd PE | 26.77 |
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 | 29.37 | ||
| EV/EBITDA | 19.5 |
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)3.28
PEG (5Y)2.84
EPS Next 2Y9.38%
EPS Next 3Y9.07%
5. Dividend
5.1 Amount
ADP has a Yearly Dividend Yield of 2.11%.
ADP's Dividend Yield is rather good when compared to the industry average which is at 1.85. ADP pays more dividend than 87.01% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.36, ADP has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.11% |
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 its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
Dividend Growth(5Y)12.44%
Div Incr Years26
Div Non Decr Years26
5.3 Sustainability
ADP pays out 58.20% 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.
DP58.2%
EPS Next 2Y9.38%
EPS Next 3Y9.07%
AUTOMATIC DATA PROCESSING
NASDAQ:ADP (12/20/2024, 8:00:00 PM)
After market: 294.02 0 (0%)294.02
+2.69 (+0.92%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners83.89%
Inst Owner Change1.82%
Ins Owners0.11%
Ins Owner Change4.77%
Market Cap119.80B
Analysts66.96
Price Target303.97 (3.38%)
Short Float %1.35%
Short Ratio3.26
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.11% |
Dividend Growth(5Y)12.44%
DP58.2%
Div Incr Years26
Div Non Decr Years26
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)2.56%
Min EPS beat(2)0.58%
Max EPS beat(2)4.53%
EPS beat(4)4
Avg EPS beat(4)2%
Min EPS beat(4)0.5%
Max EPS beat(4)4.53%
EPS beat(8)8
Avg EPS beat(8)1.76%
EPS beat(12)12
Avg EPS beat(12)1.99%
EPS beat(16)16
Avg EPS beat(16)3.57%
Revenue beat(2)1
Avg Revenue beat(2)-0.11%
Min Revenue beat(2)-0.45%
Max Revenue beat(2)0.22%
Revenue beat(4)1
Avg Revenue beat(4)-0.35%
Min Revenue beat(4)-0.74%
Max Revenue beat(4)0.22%
Revenue beat(8)3
Avg Revenue beat(8)-0.27%
Revenue beat(12)7
Avg Revenue beat(12)-0.04%
Revenue beat(16)10
Avg Revenue beat(16)0.2%
PT rev (1m)7.2%
PT rev (3m)9.25%
EPS NQ rev (1m)0%
EPS NQ rev (3m)-2.55%
EPS NY rev (1m)0%
EPS NY rev (3m)-0.79%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)0.68%
Revenue NY rev (1m)0.01%
Revenue NY rev (3m)1.17%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 31.18 | ||
| Fwd PE | 26.77 | ||
| P/S | 6.14 | ||
| P/FCF | 29.37 | ||
| P/OCF | 25.73 | ||
| P/B | 22.4 | ||
| P/tB | 72.64 | ||
| EV/EBITDA | 19.5 |
EPS(TTM)9.43
EY3.21%
EPS(NY)10.98
Fwd EY3.74%
FCF(TTM)10.01
FCFY3.4%
OCF(TTM)11.43
OCFY3.89%
SpS47.91
BVpS13.13
TBVpS4.05
PEG (NY)3.28
PEG (5Y)2.84
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 7.77% | ||
| ROE | 71.96% | ||
| ROCE | 50.74% | ||
| ROIC | 27.27% | ||
| ROICexc | 55.23% | ||
| ROICexgc | 114.14% | ||
| OM | 26.35% | ||
| PM (TTM) | 19.71% | ||
| GM | 45.91% | ||
| FCFM | 20.89% |
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-Score9
Asset Turnover0.39
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 1.38 | ||
| Debt/FCF | 2.05 | ||
| Debt/EBITDA | 1.29 | ||
| Cap/Depr | 103.18% | ||
| Cap/Sales | 2.95% | ||
| Interest Coverage | 12.94 | ||
| Cash Conversion | 81.63% | ||
| Profit Quality | 105.97% | ||
| Current Ratio | 1.01 | ||
| Quick Ratio | 1.01 | ||
| Altman-Z | 3.06 |
F-Score9
WACC9.49%
ROIC/WACC2.87
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)11.6%
EPS 3Y15.1%
EPS 5Y10.99%
EPS Q2Q%12.02%
EPS Next Y9.5%
EPS Next 2Y9.38%
EPS Next 3Y9.07%
EPS Next 5Y7.63%
Revenue 1Y (TTM)6.63%
Revenue growth 3Y8.57%
Revenue growth 5Y6.36%
Sales Q2Q%7.1%
Revenue Next Year6.35%
Revenue Next 2Y5.98%
Revenue Next 3Y5.76%
Revenue Next 5Y4.98%
EBIT growth 1Y11.77%
EBIT growth 3Y14.48%
EBIT growth 5Y10.53%
EBIT Next Year19.78%
EBIT Next 3Y11.03%
EBIT Next 5Y9.85%
FCF growth 1Y29.91%
FCF growth 3Y11.58%
FCF growth 5Y11.12%
OCF growth 1Y25.97%
OCF growth 3Y10.36%
OCF growth 5Y9.11%