AUTOMATIC DATA PROCESSING (ADP) Stock Fundamental Analysis
NASDAQ:ADP - Nasdaq - US0530151036 - Common Stock - Currency: USD
ADP gets a fundamental rating of 6 out of 10. The analysis compared the fundamentals against 83 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
Looking at the Return On Assets, with a value of 6.14%, ADP is in the better half of the industry, outperforming 65.06% of the companies in the same industry.
With an excellent Return On Equity value of 77.46%, ADP belongs to the best of the industry, outperforming 92.77% of the companies in the same industry.
ADP's Return On Invested Capital of 41.33% is amongst the best of the industry. ADP outperforms 98.80% of its industry peers.
The Average Return On Invested Capital over the past 3 years for ADP is significantly above the industry average of 13.57%.
The last Return On Invested Capital (41.33%) for ADP is above the 3 year average (40.21%), which is a sign of increasing profitability.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 6.14% | ||
| ROE | 77.46% | ||
| ROIC | 41.33% |
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 19.76%. This is amongst the best in the industry. ADP outperforms 90.36% of its industry peers.
In the last couple of years the Profit Margin of ADP has grown nicely.
Looking at the Operating Margin, with a value of 26.43%, ADP belongs to the top of the industry, outperforming 90.36% of the companies in the same industry.
ADP's Operating Margin has improved in the last couple of years.
The Gross Margin of ADP (46.04%) is comparable to the rest of the industry.
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 | 26.43% | ||
| PM (TTM) | 19.76% | ||
| GM | 46.04% |
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.
ADP has less shares outstanding than it did 1 year ago.
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
An Altman-Z score of 2.33 indicates that ADP is not a great score, but indicates only limited risk for bankruptcy at the moment.
ADP's Altman-Z score of 2.33 is in line compared to the rest of the industry. ADP outperforms 46.99% of its industry peers.
The Debt to FCF ratio of ADP is 0.95, which is an excellent value as it means it would take ADP, only 0.95 years of fcf income to pay off all of its debts.
ADP's Debt to FCF ratio of 0.95 is fine compared to the rest of the industry. ADP outperforms 77.11% of its industry peers.
A Debt/Equity ratio of 0.59 indicates that ADP is somewhat dependend on debt financing.
ADP has a Debt to Equity ratio (0.59) which is comparable to the rest of the industry.
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 | 0.59 | ||
| Debt/FCF | 0.95 | ||
| Altman-Z | 2.33 |
ROIC/WACC4.6
WACC8.98%
2.3 Liquidity
A Current Ratio of 1.00 indicates that ADP may have some problems paying its short term obligations.
The Current ratio of ADP (1.00) is worse than 73.49% of its industry peers.
ADP has a Quick Ratio of 1.00. This is a bad value and indicates that ADP is not financially healthy enough and could expect problems in meeting its short term obligations.
With a Quick ratio value of 1.00, ADP is not doing good in the industry: 73.49% of the companies in the same industry are doing better.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1 | ||
| Quick Ratio | 1 |
3. Growth
3.1 Past
ADP shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 11.95%, 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 10.99% on average per year.
ADP shows a small growth in Revenue. In the last year, the Revenue has grown by 7.09%.
The Revenue has been growing slightly by 6.36% on average over the past years.
EPS 1Y (TTM)11.95%
EPS 3Y15.1%
EPS 5Y10.99%
EPS Q2Q%10.33%
Revenue 1Y (TTM)7.09%
Revenue growth 3Y8.57%
Revenue growth 5Y6.36%
Sales Q2Q%8.15%
3.2 Future
The Earnings Per Share is expected to grow by 8.66% on average over the next years. This is quite good.
Based on estimates for the next years, ADP will show a small growth in Revenue. The Revenue will grow by 6.06% on average per year.
EPS Next Y9.33%
EPS Next 2Y9.36%
EPS Next 3Y9.38%
EPS Next 5Y8.66%
Revenue Next Year6.57%
Revenue Next 2Y6.14%
Revenue Next 3Y5.96%
Revenue Next 5Y6.06%
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.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is stable.
4. Valuation
4.1 Price/Earnings Ratio
With a Price/Earnings ratio of 30.39, 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 63.86% of the companies are valued more cheaply.
ADP's Price/Earnings ratio indicates a similar valuation than the S&P500 average which is at 28.29.
The Price/Forward Earnings ratio is 26.71, which means the current valuation is very expensive for ADP.
ADP's Price/Forward Earnings is on the same level as the industry average.
ADP's Price/Forward Earnings ratio indicates a valuation a bit more expensive than the S&P500 average which is at 21.08.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 30.39 | ||
| Fwd PE | 26.71 |
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 | 28.44 | ||
| EV/EBITDA | 20.77 |
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)3.26
PEG (5Y)2.77
EPS Next 2Y9.36%
EPS Next 3Y9.38%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 2.10%, ADP has a reasonable but not impressive dividend return.
ADP's Dividend Yield is rather good when compared to the industry average which is at 2.41. ADP pays more dividend than 84.34% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.52, ADP has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.1% |
5.2 History
The dividend of ADP is nicely growing with an annual growth rate of 12.44%!
ADP has been paying a dividend for at least 10 years, so it has 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
58.37% of the earnings are spent on dividend by ADP. 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.
DP58.37%
EPS Next 2Y9.36%
EPS Next 3Y9.38%
293.28
-0.86 (-0.29%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners84.47%
Inst Owner Change0.94%
Ins Owners0.12%
Ins Owner Change0.47%
Market Cap119.33B
Analysts67.27
Price Target317.01 (8.09%)
Short Float %1.53%
Short Ratio3.48
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.1% |
Yearly Dividend5.32
Dividend Growth(5Y)12.44%
DP58.37%
Div Incr Years26
Div Non Decr Years26
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)3.01%
Min EPS beat(2)1.48%
Max EPS beat(2)4.53%
EPS beat(4)4
Avg EPS beat(4)2.24%
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)2.08%
EPS beat(16)16
Avg EPS beat(16)2.64%
Revenue beat(2)2
Avg Revenue beat(2)0.39%
Min Revenue beat(2)0.22%
Max Revenue beat(2)0.57%
Revenue beat(4)2
Avg Revenue beat(4)-0.03%
Min Revenue beat(4)-0.45%
Max Revenue beat(4)0.57%
Revenue beat(8)4
Avg Revenue beat(8)-0.11%
Revenue beat(12)7
Avg Revenue beat(12)-0.02%
Revenue beat(16)10
Avg Revenue beat(16)0.08%
PT rev (1m)0.14%
PT rev (3m)4.29%
EPS NQ rev (1m)0%
EPS NQ rev (3m)-2.36%
EPS NY rev (1m)-0.04%
EPS NY rev (3m)-0.15%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)-0.98%
Revenue NY rev (1m)0%
Revenue NY rev (3m)0.21%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 30.39 | ||
| Fwd PE | 26.71 | ||
| P/S | 6 | ||
| P/FCF | 28.44 | ||
| P/OCF | 25 | ||
| P/B | 23.5 | ||
| P/tB | 769.35 | ||
| EV/EBITDA | 20.77 |
EPS(TTM)9.65
EY3.29%
EPS(NY)10.98
Fwd EY3.74%
FCF(TTM)10.31
FCFY3.52%
OCF(TTM)11.73
OCFY4%
SpS48.92
BVpS12.48
TBVpS0.38
PEG (NY)3.26
PEG (5Y)2.77
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 6.14% | ||
| ROE | 77.46% | ||
| ROCE | 53.71% | ||
| ROIC | 41.33% | ||
| ROICexc | 53.42% | ||
| ROICexgc | 152.5% | ||
| OM | 26.43% | ||
| PM (TTM) | 19.76% | ||
| GM | 46.04% | ||
| FCFM | 21.08% |
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-Score6
Asset Turnover0.31
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.59 | ||
| Debt/FCF | 0.95 | ||
| Debt/EBITDA | 0.51 | ||
| Cap/Depr | 101.32% | ||
| Cap/Sales | 2.9% | ||
| Interest Coverage | 12.81 | ||
| Cash Conversion | 81.87% | ||
| Profit Quality | 106.67% | ||
| Current Ratio | 1 | ||
| Quick Ratio | 1 | ||
| Altman-Z | 2.33 |
F-Score6
WACC8.98%
ROIC/WACC4.6
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)11.95%
EPS 3Y15.1%
EPS 5Y10.99%
EPS Q2Q%10.33%
EPS Next Y9.33%
EPS Next 2Y9.36%
EPS Next 3Y9.38%
EPS Next 5Y8.66%
Revenue 1Y (TTM)7.09%
Revenue growth 3Y8.57%
Revenue growth 5Y6.36%
Sales Q2Q%8.15%
Revenue Next Year6.57%
Revenue Next 2Y6.14%
Revenue Next 3Y5.96%
Revenue Next 5Y6.06%
EBIT growth 1Y11.88%
EBIT growth 3Y14.48%
EBIT growth 5Y10.53%
EBIT Next Year19.9%
EBIT Next 3Y11.17%
EBIT Next 5Y9.85%
FCF growth 1Y43.14%
FCF growth 3Y11.58%
FCF growth 5Y11.12%
OCF growth 1Y36.32%
OCF growth 3Y10.36%
OCF growth 5Y9.11%