AUTOMATIC DATA PROCESSING (ADP) Stock Fundamental Analysis
NASDAQ:ADP - Nasdaq - US0530151036 - Common Stock
Overall ADP gets a fundamental rating of 6 out of 10. We evaluated ADP against 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 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.
Each year in the past 5 years ADP had a positive operating cash flow.
1.2 Ratios
ADP has a Return On Assets of 7.77%. This is in the better half of the industry: ADP outperforms 73.42% of its industry peers.
ADP's Return On Equity of 71.96% is amongst the best of the industry. ADP outperforms 94.94% of its industry peers.
With an excellent Return On Invested Capital value of 27.27%, ADP belongs to the best of the industry, outperforming 93.67% 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 13.48%.
The last Return On Invested Capital (27.27%) 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 | 7.77% | ||
| 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
ADP has a better Profit Margin (19.71%) than 92.41% of its industry peers.
ADP's Profit Margin has improved in the last couple of years.
Looking at the Operating Margin, with a value of 26.35%, ADP belongs to the top of the industry, outperforming 89.87% of the companies in the same industry.
ADP's Operating Margin has improved in the last couple of years.
ADP has a Gross Margin (45.91%) which 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 | 26.35% | ||
| 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
ADP has an Altman-Z score of 3.08. This indicates that ADP is financially healthy and has little risk of bankruptcy at the moment.
ADP has a Altman-Z score of 3.08. This is comparable to the rest of the industry: ADP outperforms 49.37% of its industry peers.
The Debt to FCF ratio of ADP is 2.05, which is a good value as it means it would take ADP, 2.05 years of fcf income to pay off all of its debts.
The Debt to FCF ratio of ADP (2.05) is better than 73.42% 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.
The Debt to Equity ratio of ADP (1.38) is worse than 82.28% 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 | 1.38 | ||
| Debt/FCF | 2.05 | ||
| Altman-Z | 3.08 |
ROIC/WACC2.9
WACC9.42%
2.3 Liquidity
A Current Ratio of 1.01 indicates that ADP should not have too much problems paying its short term obligations.
Looking at the Current ratio, with a value of 1.01, ADP is doing worse than 72.15% of the companies in the same industry.
A Quick Ratio of 1.01 indicates that ADP should not have too much problems paying its short term obligations.
ADP has a worse Quick ratio (1.01) than 72.15% 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.
The Revenue has been growing slightly by 6.63% in the past year.
Measured over the past years, ADP shows a small growth in Revenue. The Revenue has been growing by 6.36% on average per year.
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.
Based on estimates for the next years, ADP will show a small growth in Revenue. The Revenue will grow by 4.98% on average per year.
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
The EPS growth rate is decreasing: in the next years the growth will be less than in the last years.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
4. Valuation
4.1 Price/Earnings Ratio
With a Price/Earnings ratio of 31.51, ADP can be considered very expensive at the moment.
ADP's Price/Earnings ratio is a bit more expensive when compared to the industry. ADP is more expensive than 62.03% of the companies in the same industry.
The average S&P500 Price/Earnings ratio is at 28.29. ADP is around the same levels.
A Price/Forward Earnings ratio of 27.05 indicates a quite expensive valuation of ADP.
Compared to the rest of the industry, the Price/Forward Earnings ratio of ADP is on the same level as its industry peers.
ADP is valuated at similar levels of the S&P average when we compare the Price/Forward Earnings ratio to 24.44, which is the current average of the S&P500 Index.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 31.51 | ||
| Fwd PE | 27.05 |
4.2 Price Multiples
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of ADP is on the same level as its industry peers.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of ADP is on the same level as its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 29.68 | ||
| EV/EBITDA | 19.79 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
The excellent profitability rating of ADP may justify a higher PE ratio.
PEG (NY)3.32
PEG (5Y)2.87
EPS Next 2Y9.38%
EPS Next 3Y9.07%
5. Dividend
5.1 Amount
ADP has a Yearly Dividend Yield of 2.08%. 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 1.82. ADP pays more dividend than 86.08% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.28, ADP has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.08% |
5.2 History
On average, the dividend of ADP grows each year by 12.44%, which is quite nice.
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
ADP pays out 58.20% of its income as dividend. 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.
DP58.2%
EPS Next 2Y9.38%
EPS Next 3Y9.07%
AUTOMATIC DATA PROCESSING
NASDAQ:ADP (1/22/2025, 2:08:07 PM)
297.12
-1.03 (-0.35%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners83.89%
Inst Owner Change-0.45%
Ins Owners0.11%
Ins Owner Change4.15%
Market Cap121.06B
Analysts66.96
Price Target303.97 (2.31%)
Short Float %1.5%
Short Ratio3.52
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.08% |
Yearly Dividend5.32
Dividend Growth(5Y)12.44%
DP58.2%
Div Incr Years26
Div Non Decr Years26
Ex-DateN/A
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)0%
PT rev (3m)9%
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%
Revenue NY rev (3m)0.77%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 31.51 | ||
| Fwd PE | 27.05 | ||
| P/S | 6.2 | ||
| P/FCF | 29.68 | ||
| P/OCF | 26 | ||
| P/B | 22.63 | ||
| P/tB | 73.4 | ||
| EV/EBITDA | 19.79 |
EPS(TTM)9.43
EY3.17%
EPS(NY)10.98
Fwd EY3.7%
FCF(TTM)10.01
FCFY3.37%
OCF(TTM)11.43
OCFY3.85%
SpS47.91
BVpS13.13
TBVpS4.05
PEG (NY)3.32
PEG (5Y)2.87
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 | 3.08 |
F-Score9
WACC9.42%
ROIC/WACC2.9
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%
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%