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 82 industry peers in the Professional Services industry. ADP has outstanding health and profitabily ratings, belonging to the best of the industry. This is a solid base for any company. ADP does not seem to be growing, but still is valued expensively.
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.
Of the past 5 years ADP 4 years were profitable.
Of the past 5 years ADP 4 years had a positive operating cash flow.
1.2 Ratios
ADP has a better Return On Assets (7.08%) than 71.95% of its industry peers.
ADP's Return On Equity of 68.29% is amongst the best of the industry. ADP outperforms 93.90% of its industry peers.
Looking at the Return On Invested Capital, with a value of 35.47%, ADP belongs to the top of the industry, outperforming 98.78% of the companies in the same industry.
The Average Return On Invested Capital over the past 3 years for ADP is significantly above the industry average of 12.32%.
The last Return On Invested Capital (35.47%) 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 | 7.08% | ||
| 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 91.46% of the companies in the same industry.
In the last couple of years the Profit Margin of ADP has grown nicely.
The Operating Margin of ADP (26.48%) is better than 91.46% of its industry peers.
In the last couple of years the Operating Margin of ADP has grown nicely.
With a decent Gross Margin value of 47.34%, ADP is doing good in the industry, outperforming 60.98% of the companies in the same 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 | 26.48% | ||
| 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
With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), ADP is creating value.
ADP has no outstanding debt. Therefor its Debt/Equity and Debt/FCF ratios are 0 and belong to the best of the industry.
2.2 Solvency
An Altman-Z score of 2.75 indicates that ADP is not a great score, but indicates only limited risk for bankruptcy at the moment.
Looking at the Altman-Z score, with a value of 2.75, ADP is in line with its industry, outperforming 45.12% of the companies in the same industry.
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.
ADP has a better Debt to FCF ratio (0.94) than 80.49% of its industry peers.
A Debt/Equity ratio of 0.68 indicates that ADP is somewhat dependend on debt financing.
ADP has a Debt to Equity ratio of 0.68. This is comparable to the rest of the industry: ADP outperforms 40.24% 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 | 0.68 | ||
| Debt/FCF | 0.94 | ||
| Altman-Z | 2.75 |
ROIC/WACC3.99
WACC8.88%
2.3 Liquidity
ADP has a Current Ratio of 1.02. This is a normal value and indicates that ADP is financially healthy and should not expect problems in meeting its short term obligations.
The Current ratio of ADP (1.02) is worse than 74.39% of its industry peers.
ADP has a Quick Ratio of 1.02. This is a normal value and indicates that ADP is financially healthy and should not expect problems in meeting its short term obligations.
ADP has a Quick ratio of 1.02. This is in the lower half of the industry: ADP underperforms 74.39% of its industry peers.
ADP does not score too well on the current and quick ratio evaluation. However, as it has excellent solvency and profitability, these ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.
| 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 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.
EPS 1Y (TTM)8.93%
EPS 3Y12.57%
EPS 5Y11.05%
EPS Q2Q%8.13%
Revenue 1Y (TTM)N/A
Revenue growth 3YN/A
Revenue growth 5YN/A
Sales Q2Q%7.51%
3.2 Future
Based on estimates for the next years, ADP will show a small growth in Earnings Per Share. The EPS will grow by 7.76% on average per year.
The Revenue is expected to grow by 5.01% on average over the next years.
EPS Next Y9.91%
EPS Next 2Y9.5%
EPS Next 3Y8.88%
EPS Next 5Y7.76%
Revenue Next Year5.66%
Revenue Next 2Y5.69%
Revenue Next 3Y6.3%
Revenue Next 5Y5.01%
3.3 Evolution
The EPS growth rate is decreasing: in the next years the growth will be less than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
A Price/Earnings ratio of 30.04 indicates a quite expensive valuation of ADP.
The rest of the industry has a similar Price/Earnings ratio as ADP.
ADP's Price/Earnings ratio indicates a similar valuation than the S&P500 average which is at 26.82.
Based on the Price/Forward Earnings ratio of 27.33, the valuation of ADP can be described as expensive.
Based on the Price/Forward Earnings ratio, ADP is valued a bit more expensive than the industry average as 62.20% of the companies are valued more cheaply.
Compared to an average S&P500 Price/Forward Earnings ratio of 36.21, ADP is valued a bit cheaper.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 30.04 | ||
| Fwd PE | 27.33 |
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 ratio is in line with the industry average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 28.74 | ||
| EV/EBITDA | 20.65 |
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)3.03
PEG (5Y)2.72
EPS Next 2Y9.5%
EPS Next 3Y8.88%
5. Dividend
5.1 Amount
ADP has a Yearly Dividend Yield of 1.99%. 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 2.17. ADP pays more dividend than 82.93% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.39, ADP has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.99% |
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 their dividend for at least 10 years, which is a reliable track record.
Dividend Growth(5Y)12.44%
Div Incr Years26
Div Non Decr Years26
5.3 Sustainability
ADP pays out 58.73% 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.
DP58.73%
EPS Next 2Y9.5%
EPS Next 3Y8.88%
300.44
-9.06 (-2.93%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners84.68%
Inst Owner Change-0.63%
Ins Owners0.11%
Ins Owner Change-0.52%
Market Cap121.95B
Analysts67.62
Price Target322.49 (7.34%)
Short Float %1.25%
Short Ratio3.24
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.99% |
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)0.18%
PT rev (3m)2.01%
EPS NQ rev (1m)0.04%
EPS NQ rev (3m)-0.98%
EPS NY rev (1m)0.01%
EPS NY rev (3m)0.41%
Revenue NQ rev (1m)-0.1%
Revenue NQ rev (3m)-0.2%
Revenue NY rev (1m)-0.01%
Revenue NY rev (3m)0.22%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 30.04 | ||
| Fwd PE | 27.33 | ||
| P/S | 6.04 | ||
| P/FCF | 28.74 | ||
| P/OCF | 25.4 | ||
| P/B | 20.83 | ||
| P/tB | 128.27 | ||
| EV/EBITDA | 20.65 |
EPS(TTM)10
EY3.33%
EPS(NY)10.99
Fwd EY3.66%
FCF(TTM)10.45
FCFY3.48%
OCF(TTM)11.83
OCFY3.94%
SpS49.77
BVpS14.42
TBVpS2.34
PEG (NY)3.03
PEG (5Y)2.72
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 | 2.75 |
F-Score8
WACC8.88%
ROIC/WACC3.99
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)8.93%
EPS 3Y12.57%
EPS 5Y11.05%
EPS Q2Q%8.13%
EPS Next Y9.91%
EPS Next 2Y9.5%
EPS Next 3Y8.88%
EPS Next 5Y7.76%
Revenue 1Y (TTM)N/A
Revenue growth 3YN/A
Revenue growth 5YN/A
Sales Q2Q%7.51%
Revenue Next Year5.66%
Revenue Next 2Y5.69%
Revenue Next 3Y6.3%
Revenue Next 5Y5.01%
EBIT growth 1Y9.59%
EBIT growth 3Y14.49%
EBIT growth 5Y10.53%
EBIT Next Year19.92%
EBIT Next 3Y10.81%
EBIT Next 5Y11.23%
FCF growth 1Y26.29%
FCF growth 3Y11.58%
FCF growth 5Y11.12%
OCF growth 1Y22.02%
OCF growth 3Y10.36%
OCF growth 5Y9.11%