250.69 USD
-3.82 (-1.5%)
250.23 USD
-0.46 (-0.18%)
We assign a fundamental rating of 6 out of 10 to ADP. ADP was compared to 87 industry peers in the Professional Services industry. While ADP has a great profitability rating, there are some minor concerns on its financial health. While showing a medium growth rate, ADP is valued expensive at the moment. Finally ADP also has an excellent dividend rating. With these ratings, ADP could be worth investigating further for dividend investing!.
1. Profitability
1.1 Basic Checks
- In the past year ADP was profitable.
- ADP had a positive operating cash flow in the past year.
- ADP had positive earnings in each of the past 5 years.
- Each year in the past 5 years ADP had a positive operating cash flow.
1.2 Ratios
- With a decent Return On Assets value of 7.61%, ADP is doing good in the industry, outperforming 73.56% of the companies in the same industry.
- ADP has a Return On Equity of 64.90%. This is amongst the best in the industry. ADP outperforms 95.40% of its industry peers.
- ADP's Return On Invested Capital of 24.00% is amongst the best of the industry. ADP outperforms 93.10% of its industry peers.
- The Average Return On Invested Capital over the past 3 years for ADP is significantly above the industry average of 11.85%.
- The last Return On Invested Capital (24.00%) 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 | 7.61% | ||
| 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
- Looking at the Profit Margin, with a value of 19.79%, ADP belongs to the top of the industry, outperforming 87.36% of the companies in the same industry.
- ADP's Profit Margin has improved in the last couple of years.
- ADP has a Operating Margin of 26.27%. This is amongst the best in the industry. ADP outperforms 91.95% of its industry peers.
- In the last couple of years the Operating Margin of ADP has grown nicely.
- The Gross Margin of ADP (47.26%) is better than 64.37% of its industry peers.
- 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
- 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.
- Compared to 5 years ago, ADP has less shares outstanding
- Compared to 1 year ago, ADP has a worse debt to assets ratio.
2.2 Solvency
- ADP has an Altman-Z score of 2.70. 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 of 2.70. This is comparable to the rest of the industry: ADP outperforms 50.57% of its industry peers.
- 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.
- ADP has a Debt to FCF ratio of 2.18. This is in the better half of the industry: ADP outperforms 71.26% of its industry peers.
- ADP has a Debt/Equity ratio of 1.44. This is a high value indicating a heavy dependency on external 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 73.56% 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 | 2.7 |
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.
- ADP has a worse Current ratio (1.05) than 71.26% of its industry peers.
- A Quick Ratio of 1.05 indicates that ADP should not have too much problems paying its short term obligations.
- Looking at the Quick ratio, with a value of 1.05, ADP is doing worse than 71.26% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.05 | ||
| Quick Ratio | 1.05 |
3. Growth
3.1 Past
- ADP shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 8.08%, which is quite good.
- 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.
- ADP shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 7.10% yearly.
EPS 1Y (TTM)8.08%
EPS 3Y12.57%
EPS 5Y11.05%
EPS Q2Q%11.49%
Revenue 1Y (TTM)7.07%
Revenue growth 3Y7.61%
Revenue growth 5Y7.1%
Sales Q2Q%6.16%
3.2 Future
- ADP is expected to show a small growth in Earnings Per Share. In the coming years, the EPS will grow by 7.91% yearly.
- The Revenue is expected to grow by 5.68% on average over the next years.
EPS Next Y10.23%
EPS Next 2Y9.75%
EPS Next 3Y9.56%
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
- ADP is valuated rather expensively with a Price/Earnings ratio of 24.04.
- ADP's Price/Earnings is on the same level as the industry average.
- ADP is valuated at similar levels of the S&P average when we compare the Price/Earnings ratio to 28.60, which is the current average of the S&P500 Index.
- With a Price/Forward Earnings ratio of 20.81, ADP is valued on the expensive side.
- ADP's Price/Forward Earnings ratio is in line with the industry average.
- ADP's Price/Forward Earnings ratio indicates a similar valuation than the S&P500 average which is at 25.83.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 24.04 | ||
| Fwd PE | 20.81 |
4.2 Price Multiples
- The rest of the industry has a similar Enterprise Value to EBITDA ratio as ADP.
- Based on the Price/Free Cash Flow ratio, ADP is valued a bit cheaper than the industry average as 64.37% of the companies are valued more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 24.09 | ||
| EV/EBITDA | 15.12 |
4.3 Compensation for Growth
- The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
- ADP has an outstanding profitability rating, which may justify a higher PE ratio.
PEG (NY)2.35
PEG (5Y)2.17
EPS Next 2Y9.75%
EPS Next 3Y9.56%
5. Dividend
5.1 Amount
- ADP has a Yearly Dividend Yield of 2.67%. Purely for dividend investing, there may be better candidates out there.
- Compared to an average industry Dividend Yield of 1.44, ADP pays a better dividend. On top of this ADP pays more dividend than 86.21% of the companies listed in the same industry.
- ADP's Dividend Yield is a higher than the S&P500 average which is at 1.82.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.67% |
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
- 59.30% 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.
DP59.3%
EPS Next 2Y9.75%
EPS Next 3Y9.56%
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%.