AUTOMATIC DATA PROCESSING (ADP) Stock Fundamental Analysis
NASDAQ:ADP - Nasdaq - US0530151036 - Common Stock - Currency: USD
We assign a fundamental rating of 7 out of 10 to ADP. ADP was compared to 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. While showing a medium growth rate, ADP is valued expensive at the moment.
1. Profitability
1.1 Basic Checks
In the past year ADP was profitable.
In the past year ADP had a positive cash flow from operations.
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 7.08%. This is in the better half of the industry: ADP outperforms 70.73% of its industry peers.
ADP has a better Return On Equity (68.29%) than 92.68% of its industry peers.
ADP's Return On Invested Capital of 35.47% is amongst the best of the industry. ADP outperforms 98.78% of its industry peers.
ADP had an Average Return On Invested Capital over the past 3 years of 40.21%. This is significantly above the industry average of 12.28%.
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
ADP has a better Profit Margin (19.79%) than 90.24% of its industry peers.
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.
ADP's Operating Margin has improved in the last couple of years.
The Gross Margin of ADP (47.34%) is better than 60.98% of its industry peers.
ADP's Gross Margin has been stable in the last couple of years.
| 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.
ADP has less shares outstanding than it did 1 year ago.
The number of shares outstanding for ADP has been reduced compared to 5 years ago.
ADP has a better debt/assets ratio than last year.
2.2 Solvency
ADP has an Altman-Z score of 2.79. 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.
The Altman-Z score of ADP (2.79) is comparable to the rest of the industry.
The Debt to FCF ratio of ADP is 0.94, which is an excellent value as it means it would take ADP, only 0.94 years of fcf income to pay off all of its debts.
With an excellent Debt to FCF ratio value of 0.94, ADP belongs to the best of the industry, outperforming 80.49% of the companies in the same industry.
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 41.46% 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 | 2.79 |
ROIC/WACC3.92
WACC9.04%
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.
ADP has a Current ratio of 1.02. This is in the lower half of the industry: ADP underperforms 74.39% of its industry peers.
A Quick Ratio of 1.02 indicates that ADP should not have too much problems paying its short term obligations.
ADP's Quick ratio of 1.02 is on the low side compared to the rest of the industry. ADP is outperformed by 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 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.
Looking at the last year, ADP shows a small growth in Revenue. The Revenue has grown by 6.82% in the last year.
ADP shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 6.36% yearly.
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 8.73% on average over the next years. This is quite good.
The Revenue is expected to grow by 6.37% on average over the next years.
EPS Next Y9.78%
EPS Next 2Y9.42%
EPS Next 3Y9.31%
EPS Next 5Y8.73%
Revenue Next Year6.79%
Revenue Next 2Y6.22%
Revenue Next 3Y6.03%
Revenue Next 5Y6.37%
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
The Price/Earnings ratio is 31.40, which means the current valuation is very expensive for ADP.
ADP's Price/Earnings ratio is in line with the industry average.
The average S&P500 Price/Earnings ratio is at 28.04. ADP is around the same levels.
The Price/Forward Earnings ratio is 28.08, which means the current valuation is very expensive for ADP.
62.20% of the companies in the same industry are cheaper than ADP, based on the Price/Forward Earnings ratio.
ADP's Price/Forward Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 37.64.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 31.4 | ||
| Fwd PE | 28.08 |
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 | 29.52 | ||
| EV/EBITDA | 21.21 |
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)3.21
PEG (5Y)2.86
EPS Next 2Y9.42%
EPS Next 3Y9.31%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 2.02%, ADP has a reasonable but not impressive dividend return.
ADP's Dividend Yield is rather good when compared to the industry average which is at 2.09. ADP pays more dividend than 84.15% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.31, ADP has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.02% |
5.2 History
The dividend of ADP is nicely growing with an annual growth rate of 12.44%!
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 58.73% of its income as dividend. 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 2Y9.42%
EPS Next 3Y9.31%
308.63
+2.39 (+0.78%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCommercial & Professional Services
GICS IndustryProfessional Services
Earnings (Last)
Earnings (Next)
Inst Owners84.68%
Inst Owner Change-0.67%
Ins Owners0.11%
Ins Owner Change-0.45%
Market Cap125.28B
Analysts67.62
Price Target322.49 (4.49%)
Short Float %1.15%
Short Ratio2.9
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.02% |
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)-2.29%
EPS NY rev (1m)0.01%
EPS NY rev (3m)0.41%
Revenue NQ rev (1m)-0.1%
Revenue NQ rev (3m)-0.35%
Revenue NY rev (1m)0%
Revenue NY rev (3m)0.23%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 31.4 | ||
| Fwd PE | 28.08 | ||
| P/S | 6.2 | ||
| P/FCF | 29.52 | ||
| P/OCF | 26.09 | ||
| P/B | 21.4 | ||
| P/tB | 131.76 | ||
| EV/EBITDA | 21.21 |
EPS(TTM)9.83
EY3.19%
EPS(NY)10.99
Fwd EY3.56%
FCF(TTM)10.45
FCFY3.39%
OCF(TTM)11.83
OCFY3.83%
SpS49.77
BVpS14.42
TBVpS2.34
PEG (NY)3.21
PEG (5Y)2.86
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 | 2.79 |
F-Score8
WACC9.04%
ROIC/WACC3.92
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 2Y9.42%
EPS Next 3Y9.31%
EPS Next 5Y8.73%
Revenue 1Y (TTM)6.82%
Revenue growth 3Y8.57%
Revenue growth 5Y6.36%
Sales Q2Q%5.69%
Revenue Next Year6.79%
Revenue Next 2Y6.22%
Revenue Next 3Y6.03%
Revenue Next 5Y6.37%
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%