Automatic Data Processing (ADP) AI Stock Analysis

• Market Cap: $132.14B
• Dividend Yield: 1.81%
• Average Volume (3M): 1.53M
• Price to Earnings (P/E): 33.3
• Beta (1Y): 0.63
• Revenue Growth: 6.82%
• EPS Growth: 9.03%
• Country: US
• Employees: 64,000
• Sector: Industrials
• Sector Strength: 94
• Industry: Staffing & Employment Services
• EPS (TTM): 3.06
• Shares Outstanding: 405,922,760
• 10 Day Avg. Volume: 1,342,486
• 30 Day Avg. Volume: 1,526,820
• PEG Ratio: 16.74
• Price to Book (P/B): 21.38
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 27.64
• 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: $320.38
• Price Target Upside: -1.58% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 8

• Rating: 80 Outperform
• Price Target: ―

ADP demonstrates strong financial performance with robust profitability and cash flow management. The earnings call reflects positive sentiment with solid domestic growth and strategic initiatives. However, a relatively high P/E ratio suggests caution regarding valuation, and technical indicators show moderate upward momentum. The stock is well-positioned for growth, but potential risks include its reliance on liabilities and international market challenges.

Positive Factors

Market Performance

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

Revenue Growth

Revenue estimates have been raised primarily due to expectations of higher float influenced by changes in rate cuts and yield curve movements.

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 Pressure

Intensifying competition could create downward pressure on product pricing and margins.

Cybersecurity Risks

The occurrence of any disruptive cyber incidents could harm ADP’s business or damage its brand and reputation, leading to the loss of existing customers.

Revenue Volatility

Revenue is cyclical in nature due to its unique pricing model, leading to more uncertainty and volatility in revenue projections.

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 generates revenue primarily through its comprehensive suite of human capital management solutions. The company's key revenue streams include fees from payroll processing, where ADP charges businesses for managing employee payrolls, and subscriptions to its HR management software. ADP also earns money through its benefits administration services, where it provides tools and services for managing employee benefits programs. Additionally, ADP gains revenue from tax and compliance services, assisting businesses in adhering to various regulatory requirements. The company engages in various partnerships to enhance its product offerings, such as collaborations with financial institutions for payroll-related services and integrations with other software providers. These partnerships, along with a broad client base across different industries, contribute significantly to ADP's earnings.

Automatic Data Processing Financial Statement Overview

Summary

ADP displays strong financial health with high profitability and efficient cash flow management. The income statement is robust with a net profit margin of 19.8% and revenue growth of 5.2%. The balance sheet reflects a reasonable debt-to-equity ratio of 0.73, though a low equity ratio of 10.4% suggests reliance on liabilities. Cash flow is strong, with a 25.8% growth in free cash flow.

Income Statement

ADP's income statement shows a robust financial performance with a strong Gross Profit Margin of 47.1% for TTM, indicating efficient cost management. The Net Profit Margin stands at 19.8%, reflecting profitability. Revenue growth is solid at 5.2% from the previous year, showcasing positive business momentum. EBITDA and EBIT margins are strong at 30.6% and 17.4%, respectively, signaling operational efficiency.

Balance Sheet

The balance sheet reveals a manageable Debt-to-Equity Ratio of 0.73, indicating balanced leverage. Return on Equity is impressive at 68.3%, highlighting effective use of shareholders' capital. However, the Equity Ratio is relatively low at 10.4%, suggesting a higher reliance on liabilities.

Cash Flow

ADP's cash flow statement demonstrates strong cash generation capabilities with a Free Cash Flow growth of 25.8% over the previous period. The Operating Cash Flow to Net Income Ratio is 1.2, indicating strong cash earnings. The Free Cash Flow to Net Income Ratio stands at 1.1, reflecting efficient cash conversion.

Breakdown
TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Income Statement		Total Revenue
20.20B	19.20B	18.01B	16.50B	15.01B	14.59B
	Gross Profit
9.51B	8.73B	8.06B	7.04B	6.37B	6.14B
	EBIT
3.51B	4.98B	4.51B	3.80B	3.32B	3.14B
	EBITDA
6.18B	5.80B	5.24B	4.41B	3.93B	3.77B
	Net Income Common Stockholders
4.00B	3.75B	3.41B	2.95B	2.60B	2.47B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.68B	2.91B	2.10B	1.47B	2.58B	1.91B
	Total Assets
56.45B	54.36B	50.97B	63.07B	48.77B	39.17B
	Total Debt
4.27B	3.71B	3.34B	3.49B	3.33B	2.35B
	Net Debt
1.59B	791.90M	1.26B	2.06B	753.00M	440.50M
	Total Liabilities
50.59B	49.82B	47.46B	59.84B	43.10B	33.41B
	Stockholders Equity
5.86B	4.55B	3.51B	3.23B	5.67B	5.75B
Cash Flow		Free Cash Flow
4.52B	3.59B	3.64B	2.55B	2.59B	2.41B
	Operating Cash Flow
4.80B	4.16B	4.21B	3.10B	3.09B	3.03B
	Investing Cash Flow
-3.68B	-1.39B	-2.52B	-7.01B	-3.52B	3.16B
	Financing Cash Flow
-13.03B	-1.43B	-15.68B	13.65B	6.44B	-5.89B

Automatic Data Processing Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 325.53
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ADP, the sentiment is Positive. The current price of 325.53 is above the 20-day moving average (MA) of 315.18, above the 50-day MA of 303.84, and above the 200-day MA of 293.46, indicating a bullish trend. The MACD of 6.74 indicates Negative momentum. The RSI at 70.97 is Negative, neither overbought nor oversold. The STOCH value of 75.68 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ADP.

Automatic Data Processing Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PAYX	80 Outperform	$56.70B	32.84	44.25%	2.48%	4.35%	4.86%
ADP	80 Outperform	$132.14B	33.32	76.29%	1.81%	6.82%	9.03%
KFY	77 Outperform	$3.51B	14.62	13.92%	2.34%	-3.27%	62.57%
TNET	70 Outperform	$3.98B	24.83	162.14%	1.23%	1.50%	-44.95%
Sector *	65 Neutral	$4.46B	12.18	5.23%	249.77%	4.11%	-12.28%
RHI	62 Neutral	$4.68B	22.86	14.49%	4.76%	-7.81%	-40.22%
NSP	53 Neutral	$2.44B	39.16	48.65%	3.71%	1.90%	-60.33%

Automatic Data Processing Corporate Events

Automatic Data Processing Issues $1 Billion in Senior Notes

On May 5, 2025, Automatic Data Processing, Inc. entered into an Underwriting Agreement with major financial institutions to issue and sell $1 billion in senior notes due 2032, with a 4.750% interest rate. The issuance, registered with the SEC, reflects the company’s strategic financial maneuver to potentially strengthen its capital structure and support its operational growth.

ADP Appoints Peter J. Hadley as New CFO

On April 28, 2025, Automatic Data Processing, Inc. announced the appointment of Peter J. Hadley as Chief Financial Officer, effective July 1, 2025. Mr. Hadley, who has been with the company in various leadership roles since 2006, will succeed Don McGuire. This leadership change is expected to impact the company’s financial strategies and operations, as Mr. Hadley brings extensive experience from his previous roles within the company. His compensation package includes a base salary, bonuses, and participation in long-term incentive programs, reflecting the company’s commitment to aligning executive compensation with performance and shareholder interests.