AUTOMATIC DATA PROCESSING (ADP) Stock Fundamental Analysis
NASDAQ:ADP - Nasdaq - US0530151036 - Common Stock - Currency: USD
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.
ADP had a positive operating cash flow in the past year.
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
ADP has a better Return On Assets (7.08%) than 69.51% of its industry peers.
Looking at the Return On Equity, with a value of 68.29%, ADP belongs to the top of the industry, outperforming 93.90% of the companies in the same industry.
ADP has a better Return On Invested Capital (35.47%) than 98.78% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for ADP is significantly above the industry average of 12.61%.
The 3 year average ROIC (40.21%) for ADP is well above the current ROIC(35.47%). The reason for the recent decline needs to be investigated.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 7.08% | ||
| ROE | 68.29% | ||
| ROIC | 35.47% |
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 19.79%, ADP belongs to the top of the industry, outperforming 90.24% of the companies in the same industry.
ADP's Profit Margin has improved in the last couple of years.
Looking at the Operating Margin, with a value of 26.48%, ADP belongs to the top of the industry, outperforming 91.46% of the companies in the same industry.
ADP's Operating Margin has improved in the last couple of years.
ADP's Gross Margin of 47.34% is fine compared to the rest of the industry. ADP outperforms 60.98% 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 | 26.48% | ||
| PM (TTM) | 19.79% | ||
| GM | 47.34% |
OM growth 3Y5.45%
OM growth 5Y3.92%
PM growth 3Y4.11%
PM growth 5Y3.76%
GM growth 3Y2.33%
GM growth 5Y1.05%
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.
Compared to 1 year ago, ADP has less shares outstanding
The number of shares outstanding for ADP has been reduced compared to 5 years ago.
Compared to 1 year ago, ADP has an improved debt to assets ratio.
2.2 Solvency
An Altman-Z score of 2.82 indicates that ADP is not a great score, but indicates only limited risk for bankruptcy at the moment.
ADP has a Altman-Z score (2.82) which is in line with its industry peers.
ADP has a debt to FCF ratio of 0.94. This is a very positive value and a sign of high solvency as it would only need 0.94 years to pay back of all of its debts.
With a decent Debt to FCF ratio value of 0.94, ADP is doing good in the industry, outperforming 79.27% of the companies in the same industry.
ADP has a Debt/Equity ratio of 0.68. This is a neutral value indicating ADP is somewhat dependend on debt financing.
ADP's Debt to Equity ratio of 0.68 is in line compared to the rest of the industry. ADP outperforms 40.24% 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 | 0.68 | ||
| Debt/FCF | 0.94 | ||
| Altman-Z | 2.82 |
ROIC/WACC3.89
WACC9.11%
2.3 Liquidity
A Current Ratio of 1.02 indicates that ADP should not have too much problems paying its short term obligations.
Looking at the Current ratio, with a value of 1.02, ADP is doing worse than 74.39% of the companies in the same industry.
A Quick Ratio of 1.02 indicates that ADP should not have too much problems paying its short term obligations.
Looking at the Quick ratio, with a value of 1.02, ADP is doing worse than 74.39% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.02 | ||
| Quick Ratio | 1.02 |
3. Growth
3.1 Past
ADP shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 9.47%, which is quite good.
ADP shows quite a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 10.99% yearly.
ADP shows a small growth in Revenue. In the last year, the Revenue has grown by 6.82%.
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)9.47%
EPS 3Y15.1%
EPS 5Y10.99%
EPS Q2Q%6.25%
Revenue 1Y (TTM)6.82%
Revenue growth 3Y8.57%
Revenue growth 5Y6.36%
Sales Q2Q%5.69%
3.2 Future
The Earnings Per Share is expected to grow by 8.22% on average over the next years. This is quite good.
ADP is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 6.01% yearly.
EPS Next Y9.78%
EPS Next 2Y9.36%
EPS Next 3Y9.11%
EPS Next 5Y8.22%
Revenue Next Year6.79%
Revenue Next 2Y6.19%
Revenue Next 3Y5.96%
Revenue Next 5Y6.01%
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
A Price/Earnings ratio of 31.78 indicates a quite expensive valuation of ADP.
ADP's Price/Earnings is on the same level as the industry average.
When comparing the Price/Earnings ratio of ADP to the average of the S&P500 Index (26.55), we can say ADP is valued inline with the index average.
Based on the Price/Forward Earnings ratio of 28.45, the valuation of ADP can be described as expensive.
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 rather expensively when we compare the Price/Forward Earnings ratio to 22.40, which is the current average of the S&P500 Index.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 31.78 | ||
| Fwd PE | 28.45 |
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.
ADP's Price/Free Cash Flow ratio is in line with the industry average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 29.88 | ||
| EV/EBITDA | 21.61 |
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)3.25
PEG (5Y)2.89
EPS Next 2Y9.36%
EPS Next 3Y9.11%
5. Dividend
5.1 Amount
ADP has a Yearly Dividend Yield of 1.89%. Purely for dividend investing, there may be better candidates out there.
Compared to an average industry Dividend Yield of 2.12, ADP pays a better dividend. On top of this ADP pays more dividend than 82.93% of the companies listed in the same industry.
ADP's Dividend Yield is slightly below the S&P500 average, which is at 2.39.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.89% |
5.2 History
On average, the dividend of ADP grows each year by 12.44%, which is quite nice.
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
58.73% 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.
DP58.73%
EPS Next 2Y9.36%
EPS Next 3Y9.11%
312.36
-2.16 (-0.69%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners84.47%
Inst Owner Change0.44%
Ins Owners0.12%
Ins Owner Change-0.92%
Market Cap126.79B
Analysts67.62
Price Target319.78 (2.38%)
Short Float %1.52%
Short Ratio3.33
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.89% |
Yearly Dividend5.32
Dividend Growth(5Y)12.44%
DP58.73%
Div Incr Years26
Div Non Decr Years26
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)1.67%
Min EPS beat(2)1.48%
Max EPS beat(2)1.85%
EPS beat(4)4
Avg EPS beat(4)2.11%
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)1.81%
EPS beat(16)16
Avg EPS beat(16)2.58%
Revenue beat(2)2
Avg Revenue beat(2)0.34%
Min Revenue beat(2)0.11%
Max Revenue beat(2)0.57%
Revenue beat(4)3
Avg Revenue beat(4)0.11%
Min Revenue beat(4)-0.45%
Max Revenue beat(4)0.57%
Revenue beat(8)4
Avg Revenue beat(8)-0.1%
Revenue beat(12)7
Avg Revenue beat(12)-0.03%
Revenue beat(16)11
Avg Revenue beat(16)0.12%
PT rev (1m)0.99%
PT rev (3m)1.01%
EPS NQ rev (1m)-0.06%
EPS NQ rev (3m)-2.36%
EPS NY rev (1m)0.41%
EPS NY rev (3m)0.37%
Revenue NQ rev (1m)-0.06%
Revenue NQ rev (3m)-0.25%
Revenue NY rev (1m)0.01%
Revenue NY rev (3m)0.2%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 31.78 | ||
| Fwd PE | 28.45 | ||
| P/S | 6.28 | ||
| P/FCF | 29.88 | ||
| P/OCF | 26.41 | ||
| P/B | 21.65 | ||
| P/tB | 133.35 | ||
| EV/EBITDA | 21.61 |
EPS(TTM)9.83
EY3.15%
EPS(NY)10.98
Fwd EY3.51%
FCF(TTM)10.45
FCFY3.35%
OCF(TTM)11.83
OCFY3.79%
SpS49.77
BVpS14.42
TBVpS2.34
PEG (NY)3.25
PEG (5Y)2.89
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 7.08% | ||
| ROE | 68.29% | ||
| ROCE | 50.44% | ||
| ROIC | 35.47% | ||
| ROICexc | 46.12% | ||
| ROICexgc | 102.41% | ||
| OM | 26.48% | ||
| PM (TTM) | 19.79% | ||
| GM | 47.34% | ||
| FCFM | 21% |
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)138.4%
ROICexgc(5y)107.71%
ROCE(3y)52.26%
ROCE(5y)44.53%
ROICexcg growth 3Y43.74%
ROICexcg growth 5Y22.92%
ROICexc growth 3Y26.6%
ROICexc growth 5Y15.01%
OM growth 3Y5.45%
OM growth 5Y3.92%
PM growth 3Y4.11%
PM growth 5Y3.76%
GM growth 3Y2.33%
GM growth 5Y1.05%
F-Score8
Asset Turnover0.36
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.68 | ||
| Debt/FCF | 0.94 | ||
| Debt/EBITDA | 0.67 | ||
| Cap/Depr | 97.47% | ||
| Cap/Sales | 2.76% | ||
| Interest Coverage | 12.36 | ||
| Cash Conversion | 81.08% | ||
| Profit Quality | 106.13% | ||
| Current Ratio | 1.02 | ||
| Quick Ratio | 1.02 | ||
| Altman-Z | 2.82 |
F-Score8
WACC9.11%
ROIC/WACC3.89
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)9.47%
EPS 3Y15.1%
EPS 5Y10.99%
EPS Q2Q%6.25%
EPS Next Y9.78%
EPS Next 2Y9.36%
EPS Next 3Y9.11%
EPS Next 5Y8.22%
Revenue 1Y (TTM)6.82%
Revenue growth 3Y8.57%
Revenue growth 5Y6.36%
Sales Q2Q%5.69%
Revenue Next Year6.79%
Revenue Next 2Y6.19%
Revenue Next 3Y5.96%
Revenue Next 5Y6.01%
EBIT growth 1Y9.59%
EBIT growth 3Y14.49%
EBIT growth 5Y10.53%
EBIT Next Year19.92%
EBIT Next 3Y10.81%
EBIT Next 5Y10.75%
FCF growth 1Y26.29%
FCF growth 3Y11.58%
FCF growth 5Y11.12%
OCF growth 1Y22.02%
OCF growth 3Y10.36%
OCF growth 5Y9.11%