10Y annualized return is
very good
at 13.1% per year
ADP has met or exceeded earnings expectations in
all
recent quarters (10/10)
Strong Return on Equity
Healthy Gross Profit Margin
Robust Net Profit Margin
Strong Operating Profit Margin
Low Debt Levels
Strong Interest Coverage
Strong Dividend History
High Client Satisfaction
Growth in Employer Services
Strategic Partnerships and Acquisitions
Innovative Product Developments
High Price-to-Earnings Ratio
Elevated Price-to-Sales Ratio
Moderate Liquidity Ratios
Slight Decline in Retention
Potential Slowdown in Revenue Growth
ADP demonstrates strong business quality with solid customer satisfaction and a long-standing commitment to dividends. Future prospects are promising due to strategic partnerships and innovative products, although some short-term challenges may affect growth rates. Overall, the company is well-positioned in the HR technology market.
Analysis Date: January 29, 2025
Last Updated: March 11, 2025
Past performance does not guarantee future results. The data presented is indicative and may not be updated in real-time.
Automatic Data Processing, Inc. (ADP) helps businesses manage their employees and HR needs using online tools. They provide services like payroll (paying employees), managing benefits (like health insurance), and helping with hiring and training staff. ADP is especially useful for small and medium-sized companies that want to focus on their business while ADP takes care of important HR tasks. Founded in 1949, ADP is based in Roseland, New Jersey.
Core Products
Business Type
Business to Business
Competitive Advantages
Key Business Risks
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$322.31
Current Market Price: $285.41
IV/P Ratio: 1.13x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
11.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for ADP
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (29.67)
P/B ratio ≤ 1.5 (22.98)
Current ratio ≥ 2.0 (1.18x)
Long-term debt < Net current assets (3.20x)
Margin of safety (11.0%)
ADP does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
80.28%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-30)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
46.98%
Higher values indicate better efficiency in production
TTM (as of 2025-04-30)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
19.76%
Higher values indicate better overall profitability
TTM (as of 2025-04-30)
With a net profit margin of 19.76%, ADP demonstrates strong profitability after accounting for all expenses.
The operating profit margin is 19.36%, indicating effective management of operating expenses relative to revenue.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
0.84x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q2 2025
Current Ratio
Current assets divided by current liabilities
1.18x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q2 2025
ADP's debt-to-equity ratio of 0.84 and debt-to-assets ratio of 6.68% indicate a conservative capital structure with manageable levels of debt.
An interest coverage ratio of 8.91 indicates that ADP can comfortably cover its interest expenses, reflecting strong earnings relative to interest obligations.
The current ratio of 1.18 and quick ratio of 1.18 suggest that while ADP can meet its short-term obligations, there is limited excess liquidity.
Meeting Expectations
Higher values indicate better execution and credibility
Recent Results
EPS
ADP has achieved a significant milestone by increasing its quarterly dividend for 50 consecutive years, earning it the title of a 'dividend king'. This reflects the company's financial stability and commitment to returning value to shareholders.
The company reported record client satisfaction levels, which indicates strong customer loyalty and retention. This supports ADP's competitive position in the HR technology market.
ADP recorded an 8% revenue growth in its Employer Services segment, driven by strong new business bookings and high client retention rates. This is indicative of a robust business model and demand for its services.
While client satisfaction is high, there was a slight decline in Employer Services retention compared to the prior year. This could signal potential challenges in retaining clients amid changing market conditions.
The partnership with Fiserv aims to provide integrated solutions for small businesses, enhancing ADP's service offerings. Additionally, the acquisition of WorkForce Software is expected to bolster ADP's capabilities in workforce management, positioning them strongly in the market.
The launch of ADP Lyric, a next-gen HCM platform, is generating strong interest and new business bookings, indicating a positive trajectory for future growth and innovation.
The company anticipates a deceleration in revenue growth in Q3 due to factors like foreign exchange headwinds and integration costs from acquisitions, which may impact short-term performance.
