AUTOMATIC DATA PROCESSING (ADP) Stock Fundamental Analysis
USA - NASDAQ:ADP - US0530151036 - Common Stock
291.31 USD
+1.44 (+0.5%)
291.31 USD
0 (0%)
We assign a fundamental rating of 6 out of 10 to ADP. ADP was compared to 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. While showing a medium growth rate, ADP is valued expensive at the moment.
1. Profitability
1.1 Basic Checks
ADP had positive earnings in the past year.
In the past year ADP had a positive cash flow from operations.
ADP had positive earnings in each of the past 5 years.
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 7.64%, ADP is in the better half of the industry, outperforming 74.39% of the companies in the same industry.
ADP has a better Return On Equity (65.93%) than 93.90% of its industry peers.
With an excellent Return On Invested Capital value of 24.78%, ADP belongs to the best of the industry, outperforming 93.90% of the companies in the same industry.
ADP had an Average Return On Invested Capital over the past 3 years of 36.13%. This is significantly above the industry average of 12.76%.
The last Return On Invested Capital (24.78%) 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 | 7.64% | ||
| ROE | 65.93% | ||
| ROIC | 24.78% |
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
ADP has a better Profit Margin (19.84%) than 90.24% of its industry peers.
In the last couple of years the Profit Margin of ADP has grown nicely.
With an excellent Operating Margin value of 26.42%, ADP belongs to the best of the industry, outperforming 92.68% of the companies in the same industry.
ADP's Operating Margin has improved in the last couple of years.
ADP has a better Gross Margin (47.37%) than 60.98% of its industry peers.
In the last couple of years the Gross Margin of ADP has grown nicely.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 26.42% | ||
| PM (TTM) | 19.84% | ||
| GM | 47.37% |
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
The Return on Invested Capital (ROIC) is well above the Cost of Capital (WACC), so ADP is creating value.
The number of shares outstanding for ADP has been reduced compared to 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 2.93. 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.
Looking at the Altman-Z score, with a value of 2.93, ADP is in line with its industry, outperforming 52.44% of the companies in the same industry.
ADP has a debt to FCF ratio of 1.99. This is a very positive value and a sign of high solvency as it would only need 1.99 years to pay back of all of its debts.
Looking at the Debt to FCF ratio, with a value of 1.99, ADP is in the better half of the industry, outperforming 67.07% of the companies in the same industry.
ADP has a Debt/Equity ratio of 1.41. This is a high value indicating a heavy dependency on external financing.
With a Debt to Equity ratio value of 1.41, ADP is not doing good in the industry: 80.49% of the companies in the same industry are doing better.
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 | 1.41 | ||
| Debt/FCF | 1.99 | ||
| Altman-Z | 2.93 |
ROIC/WACC2.87
WACC8.62%
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 71.95% of its industry peers.
A Quick Ratio of 1.05 indicates that ADP should not have too much problems paying its short term obligations.
ADP has a Quick ratio of 1.05. This is in the lower half of the industry: ADP underperforms 71.95% of its industry peers.
| 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 8.93%, which is quite good.
The Earnings Per Share has been growing by 11.05% 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 7.07%.
Measured over the past years, ADP shows a small growth in Revenue. The Revenue has been growing by 7.10% on average per year.
EPS 1Y (TTM)8.93%
EPS 3Y12.57%
EPS 5Y11.05%
EPS Q2Q%8.13%
Revenue 1Y (TTM)7.07%
Revenue growth 3Y7.61%
Revenue growth 5Y7.1%
Sales Q2Q%7.51%
3.2 Future
The Earnings Per Share is expected to grow by 7.85% on average over the next years.
ADP is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 5.65% yearly.
EPS Next Y10.3%
EPS Next 2Y9.86%
EPS Next 3Y9.6%
EPS Next 5Y7.85%
Revenue Next Year6.2%
Revenue Next 2Y5.95%
Revenue Next 3Y5.87%
Revenue Next 5Y5.65%
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 decreasing.
4. Valuation
4.1 Price/Earnings Ratio
With a Price/Earnings ratio of 29.13, ADP can be considered very expensive at the moment.
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 27.86, which is the current average of the S&P500 Index.
A Price/Forward Earnings ratio of 26.41 indicates a quite expensive valuation of ADP.
ADP's Price/Forward Earnings is on the same level as the industry average.
When comparing the Price/Forward Earnings ratio of ADP to the average of the S&P500 Index (23.32), we can say ADP is valued inline with the index average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 29.13 | ||
| Fwd PE | 26.41 |
4.2 Price Multiples
ADP's Enterprise Value to EBITDA is on the same level as the industry average.
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 | 26.86 | ||
| EV/EBITDA | 18.23 |
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)2.83
PEG (5Y)2.64
EPS Next 2Y9.86%
EPS Next 3Y9.6%
5. Dividend
5.1 Amount
ADP has a Yearly Dividend Yield of 2.13%.
Compared to an average industry Dividend Yield of 3.62, ADP pays a better dividend. On top of this ADP pays more dividend than 84.15% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.41, ADP has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.13% |
5.2 History
The dividend of ADP is nicely growing with an annual growth rate of 11.62%!
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)11.62%
Div Incr Years26
Div Non Decr Years26
5.3 Sustainability
ADP pays out 58.80% 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.
DP58.8%
EPS Next 2Y9.86%
EPS Next 3Y9.6%
291.31
+1.44 (+0.5%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners85.24%
Inst Owner Change-0.12%
Ins Owners0.12%
Ins Owner Change1.86%
Market Cap118.01B
Analysts67
Price Target322.81 (10.81%)
Short Float %1.76%
Short Ratio4.22
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.13% |
Yearly Dividend5.9
Dividend Growth(5Y)11.62%
DP58.8%
Div Incr Years26
Div Non Decr Years26
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)1.1%
Min EPS beat(2)0.35%
Max EPS beat(2)1.85%
EPS beat(4)4
Avg EPS beat(4)2.06%
Min EPS beat(4)0.35%
Max EPS beat(4)4.53%
EPS beat(8)8
Avg EPS beat(8)1.67%
EPS beat(12)12
Avg EPS beat(12)1.7%
EPS beat(16)16
Avg EPS beat(16)2.33%
Revenue beat(2)2
Avg Revenue beat(2)0.38%
Min Revenue beat(2)0.11%
Max Revenue beat(2)0.64%
Revenue beat(4)4
Avg Revenue beat(4)0.38%
Min Revenue beat(4)0.11%
Max Revenue beat(4)0.64%
Revenue beat(8)4
Avg Revenue beat(8)-0.16%
Revenue beat(12)7
Avg Revenue beat(12)-0.04%
Revenue beat(16)11
Avg Revenue beat(16)0.12%
PT rev (1m)-0.71%
PT rev (3m)0.28%
EPS NQ rev (1m)0%
EPS NQ rev (3m)-2.98%
EPS NY rev (1m)0%
EPS NY rev (3m)0.32%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)0.68%
Revenue NY rev (1m)0%
Revenue NY rev (3m)0.48%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 29.13 | ||
| Fwd PE | 26.41 | ||
| P/S | 5.74 | ||
| P/FCF | 26.86 | ||
| P/OCF | 23.89 | ||
| P/B | 19.07 | ||
| P/tB | 89.98 | ||
| EV/EBITDA | 18.23 |
EPS(TTM)10
EY3.43%
EPS(NY)11.03
Fwd EY3.79%
FCF(TTM)10.84
FCFY3.72%
OCF(TTM)12.19
OCFY4.19%
SpS50.76
BVpS15.28
TBVpS3.24
PEG (NY)2.83
PEG (5Y)2.64
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 7.64% | ||
| ROE | 65.93% | ||
| ROCE | 44.92% | ||
| ROIC | 24.78% | ||
| ROICexc | 46.35% | ||
| ROICexgc | 100.97% | ||
| OM | 26.42% | ||
| PM (TTM) | 19.84% | ||
| GM | 47.37% | ||
| FCFM | 21.36% |
ROA(3y)7.08%
ROA(5y)6.25%
ROE(3y)81.89%
ROE(5y)76.59%
ROIC(3y)36.13%
ROIC(5y)33.86%
ROICexc(3y)55.75%
ROICexc(5y)48.87%
ROICexgc(3y)137.09%
ROICexgc(5y)114.46%
ROCE(3y)51.2%
ROCE(5y)46.57%
ROICexcg growth 3Y-1.22%
ROICexcg growth 5Y8.54%
ROICexc growth 3Y0.6%
ROICexc growth 5Y6.46%
OM growth 3Y4.64%
OM growth 5Y4.17%
PM growth 3Y3.54%
PM growth 5Y3.25%
GM growth 3Y2.58%
GM growth 5Y1.81%
F-Score8
Asset Turnover0.39
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 1.41 | ||
| Debt/FCF | 1.99 | ||
| Debt/EBITDA | 1.45 | ||
| Cap/Depr | 93.92% | ||
| Cap/Sales | 2.66% | ||
| Interest Coverage | 12.73 | ||
| Cash Conversion | 82.14% | ||
| Profit Quality | 107.67% | ||
| Current Ratio | 1.05 | ||
| Quick Ratio | 1.05 | ||
| Altman-Z | 2.93 |
F-Score8
WACC8.62%
ROIC/WACC2.87
Cap/Depr(3y)99.42%
Cap/Depr(5y)100.95%
Cap/Sales(3y)2.92%
Cap/Sales(5y)3.1%
Profit Quality(3y)103.34%
Profit Quality(5y)99.19%
High Growth Momentum
Growth
EPS 1Y (TTM)8.93%
EPS 3Y12.57%
EPS 5Y11.05%
EPS Q2Q%8.13%
EPS Next Y10.3%
EPS Next 2Y9.86%
EPS Next 3Y9.6%
EPS Next 5Y7.85%
Revenue 1Y (TTM)7.07%
Revenue growth 3Y7.61%
Revenue growth 5Y7.1%
Sales Q2Q%7.51%
Revenue Next Year6.2%
Revenue Next 2Y5.95%
Revenue Next 3Y5.87%
Revenue Next 5Y5.65%
EBIT growth 1Y8.87%
EBIT growth 3Y12.61%
EBIT growth 5Y11.57%
EBIT Next Year19.43%
EBIT Next 3Y11.26%
EBIT Next 5Y10.37%
FCF growth 1Y22.22%
FCF growth 3Y19.94%
FCF growth 5Y12.76%
OCF growth 1Y18.81%
OCF growth 3Y16.81%
OCF growth 5Y10.3%