AUTOMATIC DATA PROCESSING (ADP) Stock Fundamental Analysis
USA - NASDAQ:ADP - US0530151036 - Common Stock
293.5 USD
-4.53 (-1.52%)
293.74 USD
+0.24 (+0.08%)
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 has a great profitability rating, 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
ADP had positive earnings in the past year.
ADP had a positive operating cash flow in the past year.
Each year in the past 5 years ADP has been profitable.
ADP had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
With a decent Return On Assets value of 7.64%, ADP is doing good in the industry, outperforming 75.61% of the companies in the same industry.
Looking at the Return On Equity, with a value of 65.93%, ADP belongs to the top of the industry, outperforming 93.90% of the companies in the same industry.
ADP has a Return On Invested Capital of 24.78%. This is amongst the best in the industry. ADP outperforms 95.12% of its industry peers.
The Average Return On Invested Capital over the past 3 years for ADP 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
With an excellent Profit Margin value of 19.84%, ADP belongs to the best of the industry, outperforming 90.24% of the companies in the same industry.
In the last couple of years the Profit Margin of ADP has grown nicely.
Looking at the Operating Margin, with a value of 26.42%, ADP belongs to the top 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.
ADP's Gross Margin has improved in the last couple of years.
| 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
With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), 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
The debt/assets ratio for ADP is higher compared to a year ago.
2.2 Solvency
ADP has an Altman-Z score of 2.96. 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 2.96, ADP is in line with its industry, outperforming 52.44% of the companies in the same industry.
The Debt to FCF ratio of ADP is 1.99, which is an excellent value as it means it would take ADP, only 1.99 years of fcf income to pay off all of its debts.
The Debt to FCF ratio of ADP (1.99) is better than 64.63% of its industry peers.
ADP has a Debt/Equity ratio of 1.41. This is a high value indicating a heavy dependency on external financing.
ADP's Debt to Equity ratio of 1.41 is on the low side compared to the rest of the industry. ADP is outperformed by 80.49% 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 | 1.41 | ||
| Debt/FCF | 1.99 | ||
| Altman-Z | 2.96 |
ROIC/WACC2.9
WACC8.55%
2.3 Liquidity
ADP has a Current Ratio of 1.05. This is a normal value and indicates that ADP is financially healthy and should not expect problems in meeting its short term obligations.
ADP's Current ratio of 1.05 is on the low side compared to the rest of the industry. ADP is outperformed by 71.95% of its industry peers.
ADP has a Quick Ratio of 1.05. This is a normal value and indicates that ADP is financially healthy and should not expect problems in meeting its short term obligations.
The Quick ratio of ADP (1.05) is worse than 71.95% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.05 | ||
| Quick Ratio | 1.05 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an nice 8.93% over the past year.
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)8.93%
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
ADP is expected to show a small growth in Earnings Per Share. In the coming years, the EPS will grow by 7.85% yearly.
Based on estimates for the next years, ADP will show a small growth in Revenue. The Revenue will grow by 5.65% on average per year.
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
Based on the Price/Earnings ratio of 29.35, the valuation of ADP can be described as expensive.
ADP's Price/Earnings is on the same level as the industry average.
ADP's Price/Earnings ratio indicates a similar valuation than the S&P500 average which is at 27.30.
With a Price/Forward Earnings ratio of 26.61, ADP can be considered very expensive at the moment.
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 (22.73), we can say ADP is valued inline with the index average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 29.35 | ||
| Fwd PE | 26.61 |
4.2 Price Multiples
ADP's Enterprise Value to EBITDA is on the same level as the industry average.
ADP's Price/Free Cash Flow is on the same level as the industry average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 27.06 | ||
| EV/EBITDA | 18.68 |
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)2.85
PEG (5Y)2.66
EPS Next 2Y9.86%
EPS Next 3Y9.6%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 2.07%, ADP has a reasonable but not impressive dividend return.
Compared to an average industry Dividend Yield of 2.18, ADP pays a better dividend. On top of this ADP pays more dividend than 84.15% of the companies listed in the same industry.
ADP's Dividend Yield is comparable with the S&P500 average which is at 2.45.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.07% |
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 their dividend for at least 10 years, which is a reliable track record.
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%
293.5
-4.53 (-1.52%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners85.28%
Inst Owner Change-0.12%
Ins Owners0.11%
Ins Owner Change3.8%
Market Cap118.88B
Analysts67
Price Target325.13 (10.78%)
Short Float %1.53%
Short Ratio3.95
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.07% |
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)-0.37%
PT rev (3m)1.67%
EPS NQ rev (1m)-0.74%
EPS NQ rev (3m)-2.41%
EPS NY rev (1m)0.36%
EPS NY rev (3m)0.48%
Revenue NQ rev (1m)0.27%
Revenue NQ rev (3m)0.76%
Revenue NY rev (1m)0.51%
Revenue NY rev (3m)0.57%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 29.35 | ||
| Fwd PE | 26.61 | ||
| P/S | 5.78 | ||
| P/FCF | 27.06 | ||
| P/OCF | 24.07 | ||
| P/B | 19.21 | ||
| P/tB | 90.64 | ||
| EV/EBITDA | 18.68 |
EPS(TTM)10
EY3.41%
EPS(NY)11.03
Fwd EY3.76%
FCF(TTM)10.85
FCFY3.7%
OCF(TTM)12.2
OCFY4.16%
SpS50.76
BVpS15.28
TBVpS3.24
PEG (NY)2.85
PEG (5Y)2.66
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 | 2.96 |
F-Score8
WACC8.55%
ROIC/WACC2.9
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 Year18.77%
EBIT Next 3Y11.41%
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%