Automatic Data Processing (ADP) AI Stock Analysis

• Market Cap: $119.90B
• Dividend Yield: 2%
• Average Volume (3M): 2.18M
• Price to Earnings (P/E): 30.7
• Beta (1Y): 0.67
• Revenue Growth: 7.09%
• EPS Growth: 11.51%
• Country: US
• Employees: 64,000
• Sector: Industrials
• Sector Strength: 61
• Industry: Staffing & Employment Services
• EPS (TTM): 9.59
• Shares Outstanding: 406,870,880
• 10 Day Avg. Volume: 2,223,167
• 30 Day Avg. Volume: 2,183,081
• PEG Ratio: 2.67
• Price to Book (P/B): N/A
• Price to Sales (P/S): 6.11
• Price to Cash Flow (P/CF): 26.10
• P/FCF Ratio: 26.90
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $317.09
• Price Target Upside: 8.51% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 11

ADP's overall score reflects its strong financial performance and optimistic earnings call outlook, despite some valuation concerns and technical indicators suggesting cautious trading. The strategic partnerships and ongoing growth initiatives bolster the company's positive trajectory.

Positive Factors

Financial Performance

ADP reported another strong quarter, indicating a robust performance and solid financial health.

Strategic Partnerships

The recently announced joint venture with Fiserv is seen as a unique partnership that leverages strong distribution capabilities and creates a one-stop-shop solution for small and medium-sized businesses.

Negative Factors

Competitive Environment

ADP participates in a highly competitive environment which could create downward pressure on product pricing and margins.

Cybersecurity Threats

Cybersecurity incidents and attacks could harm ADP’s business or damage its brand and reputation, leading to the loss of existing customers.

Automatic Data Processing Business Overview & Revenue Model

Company Description

Automatic Data Processing, Inc. provides cloud-based human capital management solutions worldwide. It operates in two segments, Employer Services and Professional Employer Organization (PEO). The Employer Services segment offers strategic, cloud-based platforms, and human resources (HR) outsourcing solutions. Its offerings include payroll, benefits administration, talent management, HR management, workforce management, insurance, retirement, and compliance services, as well as integrated HCM solutions. The PEO Services segment provides HR outsourcing solutions to small and mid-sized businesses through a co-employment model. This segment offers benefits package, protection and compliance, talent engagement, expertise, comprehensive outsourcing, and recruitment process outsourcing services. The company was founded in 1949 and is headquartered in Roseland, New Jersey.

How the Company Makes Money

ADP makes money primarily through its suite of HCM services, which are offered on a subscription and service-fee basis. Key revenue streams include payroll processing services, which involve calculating, withholding, and remitting employee taxes and paychecks, and human resources outsourcing services, where ADP manages various HR functions on behalf of its clients. ADP also generates revenue from additional services such as talent management, employee benefits administration, and retirement services. The company benefits from strategic partnerships with financial institutions and technology providers, which enhance its service offerings and expand its market reach. ADP's revenue is bolstered by its robust client retention rates and continuous innovation in cloud-based and mobile solutions, which attract new customers and encourage existing ones to adopt additional services.

Automatic Data Processing Financial Statement Overview

Summary

ADP demonstrates robust financial performance with strong revenue and profit margins. The income statement shows impressive growth, the balance sheet is stable with manageable leverage, and cash flow generation is solid, providing financial flexibility.

Income Statement

ADP shows strong revenue growth with a TTM increase of 10.6% from the previous year. The gross profit margin is healthy at 46.97% for TTM, indicating efficient cost management. The net profit margin has improved to 19.76% in TTM, showcasing enhanced profitability. EBIT and EBITDA margins remain robust at 19.35% and 30.71%, respectively, reflecting solid operational performance.

Balance Sheet

ADP maintains a stable balance sheet with a debt-to-equity ratio of 0.84, indicating manageable leverage. The return on equity (ROE) is strong at 77.46%, highlighting effective use of equity to generate profits. The equity ratio stands at 7.92%, suggesting a relatively low equity base compared to total assets, which could pose a risk if liabilities increase significantly.

Cash Flow

ADP exhibits solid cash flow performance with a free cash flow growth rate of 21.64% over the past year. The operating cash flow to net income ratio is 1.21, indicating good cash generation relative to accounting profits. The free cash flow to net income ratio of 1.11 further supports the company's ability to convert earnings into cash, providing financial flexibility.

Breakdown
TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Income Statement		Total Revenue
19.90B	19.20B	18.01B	16.50B	15.01B	14.59B
	Gross Profit
9.35B	8.73B	8.06B	7.04B	6.37B	6.14B
	EBIT
3.85B	4.98B	4.51B	3.80B	3.32B	3.14B
	EBITDA
6.11B	5.80B	5.24B	4.41B	3.93B	3.77B
	Net Income Common Stockholders
3.93B	3.75B	3.41B	2.95B	2.60B	2.47B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.00B	2.91B	2.10B	1.47B	2.58B	1.91B
	Total Assets
34.99B	54.36B	50.97B	63.07B	48.77B	39.17B
	Total Debt
41.30M	3.71B	3.34B	3.49B	3.33B	2.35B
	Net Debt
-1.92B	791.90M	1.26B	2.06B	753.00M	440.50M
	Total Liabilities
29.05B	49.82B	47.46B	59.84B	43.10B	33.41B
	Stockholders Equity
5.94B	4.55B	3.51B	3.23B	5.67B	5.75B
Cash Flow		Free Cash Flow
4.37B	3.59B	3.64B	2.55B	2.59B	2.41B
	Operating Cash Flow
4.77B	4.16B	4.21B	3.10B	3.09B	3.03B
	Investing Cash Flow
-4.21B	-1.39B	-2.52B	-7.01B	-3.52B	3.16B
	Financing Cash Flow
2.23B	-1.43B	-15.68B	13.65B	6.44B	-5.89B

Automatic Data Processing Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 292.21
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ADP, the sentiment is Negative. The current price of 292.21 is below the 20-day moving average (MA) of 296.93, below the 50-day MA of 302.19, and above the 200-day MA of 282.74, indicating a neutral trend. The MACD of 0.22 indicates Negative momentum. The RSI at 56.52 is Neutral, neither overbought nor oversold. The STOCH value of 71.60 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ADP.

Automatic Data Processing Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ADP	78 Outperform	$119.90B	30.74	83.72%	2.00%	7.09%	11.51%
NSP	77 Outperform	$3.13B	35.07	95.48%	3.06%	1.47%	-45.91%
KFY	74 Outperform	$3.31B	13.78	13.92%	2.48%	-3.27%	62.57%
PAYX	73 Outperform	$52.64B	30.39	44.25%	2.68%	4.35%	4.86%
Sector *	62 Neutral	$7.68B	13.06	3.21%	3.34%	3.61%	-14.41%
TNET	61 Neutral	$3.86B	22.50	235.37%	1.28%	1.67%	-47.56%
RHI	60 Neutral	$5.26B	21.09	16.96%	4.23%	-9.33%	-37.06%

Automatic Data Processing Corporate Events

ADP Announces Leadership Change and Executive Promotion

Automatic Data Processing, Inc. (ADP) is undergoing a leadership change with John C. Ayala stepping down as COO and Joseph DeSilva taking over as Executive Vice President, North America and Chief of Operations. DeSilva’s promotion comes with a 6.2% salary increase and a boosted bonus target, signaling ADP’s strategic moves for future growth.