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Automatic Data Processing
(NASDAQ:ADP)
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Rating:78Outperform
Price Target:
$301.00
▲(20.36% Upside)
Action:Reiterated
Date:07/29/26
The score is driven primarily by strong technical uptrend signals and a constructive FY27 outlook (revenue growth, margin expansion, and EPS growth supported by buybacks and higher client-funds interest). Financial performance remains solid with strong profitability and cash conversion, but is tempered by balance-sheet thin equity/leverage variability, a notable TTM free-cash-flow growth slowdown, and a TTM operating-profit data inconsistency. Valuation appears reasonable with a supportive dividend, but not notably cheap.
Positive Factors
High client retention and recurring bookings
Sustained 92.1% Employer Services retention and large new-booking flow (~$2.2B) indicate durable, recurring revenue and effective cross-sell. High retention reduces churn-related volatility and supports predictable cash flow and long-term revenue growth for the core HCM business.
Negative Factors
PEO margin pressure from pass-throughs
Structural mix shift toward zero-margin pass-throughs and higher workers' comp costs is compressing PEO margins. Persistent pass-through growth can restrain segment profitability and drag consolidated margins unless offset by pricing, efficiency or higher-margin service expansion.
Read all positive and negative factors
Positive Factors
Negative Factors
High client retention and recurring bookings
Sustained 92.1% Employer Services retention and large new-booking flow (~$2.2B) indicate durable, recurring revenue and effective cross-sell. High retention reduces churn-related volatility and supports predictable cash flow and long-term revenue growth for the core HCM business.
Read all positive factors
Automatic Data Processing Key Performance Indicators (KPIs)
Any
Revenue by Segment
Breaks down revenue across ADP’s business lines (for example payroll processing, HR outsourcing/PEO, benefits administration and related services), showing which units drive growth and profitability. Investors can use this to spot where growth is coming from, which segments carry higher margins, and whether the company’s strategy is shifting toward more valuable services.
Breaks down revenue across ADP’s business lines (for example payroll processing, HR outsourcing/PEO, benefits administration and related services), showing which units drive growth and profitability. Investors can use this to spot where growth is coming from, which segments carry higher margins, and whether the company’s strategy is shifting toward more valuable services.
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The Fly
The FlyAutomatic Data Processing (ADP) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$106.51B
Dividend Yield2.49%
Average Volume (3M)2.63M
Price to Earnings (P/E)24.3
Beta (1Y)0.51
Revenue Growth6.74%
EPS Growth9.46%
CountryUS
Employees67,000
SectorTechnology
Sector Strength88
IndustrySoftware - Application
Share Statistics
EPS (TTM)10.97
Shares Outstanding399,734,280
10 Day Avg. Volume2,337,451
30 Day Avg. Volume2,632,080
Financial Highlights & Ratios
PEG Ratio2.15
Price to Book (P/B)14.83
Price to Sales (P/S)4.08
P/FCF Ratio17.06
Enterprise Value/Market Cap<0.01
Enterprise Value/Revenue<0.01
Enterprise Value/Gross Profit<0.01
Enterprise Value/Ebitda<0.01
Forecast
1Y Price Target
$284.31Price Target Upside13.68% Upside
Rating ConsensusHold
Number of Analyst Covering13
EPS Forecast (FY)12.23
Revenue Forecast (FY)$23.20B
Automatic Data Processing Business Overview & Revenue Model
Company Description
Automatic Data Processing, Inc. (ADP) is a global provider of human capital management (HCM) solutions and business process outsourcing services. The company primarily serves employers across a wide range of industries and sizes, offering payroll ...
How the Company Makes Money
ADP primarily makes money by charging employers recurring fees for payroll and human resources services delivered through a mix of software (SaaS-like subscriptions) and managed services. Its key revenue streams include: (1) Employer Services fees...
Automatic Data Processing Earnings Call Summary
Earnings Call Date:Jul 29, 2026
(Q4-2026)
| % Change Since: |
Next Earnings Date:Oct 28, 2026
Earnings Call Sentiment Positive
The call conveyed a confident and progress-driven tone: strong Q4 and full-year financial performance, meaningful AI-driven product and service adoption (ADP Assist, Lyric, The Zone), record client satisfaction and high retention, and healthy bookings and capital return activity. Headwinds are present but contained — notably PEO margin contraction from pass-through dynamics, modest pays-per-control growth, a small expected retention pullback, and slight FX and client funds balance moderation. Management provided a constructive fiscal 2027 outlook that balances continued investment, productivity gains from AI, and shareholder returns.Positive Updates
Strong Quarter and Year Financials
Q4 results: 7% revenue growth, 140 basis points of adjusted EBIT margin expansion, and 17% adjusted EPS growth. Full fiscal 2026: 7% revenue growth, adjusted EBIT margin expansion of 80 basis points, 11% adjusted EPS growth, and total revenue of $21.9 billion.
Negative Updates
PEO Margin Pressure
PEO margins contracted 100 basis points in Q4 and 110 basis points for full fiscal 2026, driven by faster growth in zero-margin pass-through revenues, higher workers' compensation costs, and selling expenses; management expects further PEO margin contraction in fiscal 2027 as zero-margin pass-throughs grow faster than overall PEO revenues.
Read all updates
Q4-2026 Updates
Positive
Negative
Strong Quarter and Year Financials
Q4 results: 7% revenue growth, 140 basis points of adjusted EBIT margin expansion, and 17% adjusted EPS growth. Full fiscal 2026: 7% revenue growth, adjusted EBIT margin expansion of 80 basis points, 11% adjusted EPS growth, and total revenue of $21.9 billion.
Read all positive updates
Company Guidance
ADP guided to consolidated fiscal 2027 revenue growth of 5–6%, adjusted EBIT margin expansion of 70–90 basis points, an effective tax rate of ~23% and adjusted EPS growth of 9–11% (supported by continued elevated share repurchases); Employer Services revenue is expected to grow 5–6% with new business bookings up 4–7%, ES retention modeled to decline 10–30 bps from FY26’s 92.1%, US pays-per-control flat to +1%, and ES margins to expand; the company expects client funds average yield to rise from 3.4% to 3.7%, client funds balances to grow 3–4%, and client funds interest revenue to increase from $1.35B to $1.54–$1.56B (net client fund impact rising from $1.31B to $1.54–$1.56B), with FX a slight headwind after ~1 point of prior tailwind and the forward curve implying 25–50 bps of Fed hikes; PEO revenues are forecast to grow 5–7% (3–5% ex zero‑margin pass‑throughs) with average worksite employees ~+2% and some further PEO margin contraction as zero‑margin pass‑throughs grow faster than PEO revenues; capital return assumptions include continued repurchases given FY26 buybacks of 8.6M shares (~$2.1B, >2% of shares) and a $6B authorization.Automatic Data Processing Financial Statement Overview
Summary
Income Statement
76
Positive
Balance Sheet
62
Positive
Cash Flow
71
Positive
| Breakdown | Jun 2026 | Jun 2025 | Jun 2024 | Jun 2023 | Jun 2022 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 21.95B | 20.56B | 19.20B | 18.01B | 16.50B |
| Gross Profit | 10.58B | 10.45B | 9.59B | 8.81B | 7.73B |
| EBITDA | 6.35B | 6.24B | 5.80B | 5.24B | 4.41B |
| Net Income | 4.41B | 4.08B | 3.75B | 3.41B | 2.95B |
Balance Sheet | |||||
| Total Assets | 63.19B | 53.37B | 54.36B | 50.97B | 63.07B |
| Cash, Cash Equivalents and Short-Term Investments | 4.23B | 7.85B | 3.30B | 2.10B | 1.48B |
| Total Debt | 5.27B | 9.07B | 3.71B | 3.44B | 3.49B |
| Total Liabilities | 57.16B | 47.18B | 49.82B | 47.46B | 59.84B |
| Stockholders Equity | 6.03B | 6.19B | 4.55B | 3.51B | 3.23B |
Cash Flow | |||||
| Free Cash Flow | 5.24B | 4.77B | 3.59B | 3.64B | 2.55B |
| Operating Cash Flow | 5.44B | 4.94B | 4.16B | 4.21B | 3.10B |
| Investing Cash Flow | -4.71B | -3.04B | -1.39B | -2.52B | -7.01B |
| Financing Cash Flow | 4.88B | -6.97B | -1.43B | -15.68B | 13.65B |
Automatic Data Processing Technical Analysis
Positive
250.09
Price Trends
235.95
Positive
220.27
Positive
232.98
Positive
Market Momentum
9.38
Negative
66.78
Neutral
65.45
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 250.09 is below the 20-day moving average (MA) of 252.86, above the 50-day MA of 235.95, and above the 200-day MA of 232.98, indicating a bullish trend. The MACD of 9.38 indicates Negative momentum. The RSI at 66.78 is Neutral, neither overbought nor oversold. The STOCH value of 65.45 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ADP.
Automatic Data Processing Risk Analysis
Automatic Data Processing disclosed 1 risk factors in its most recent earnings report. Automatic Data Processing reported the most risks in the "Legal & Regulatory" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Automatic Data Processing Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $106.51B | 24.29 | 70.20% | 2.66% | 6.74% | 9.46% | |
75 Outperform | $41.56B | 23.80 | 45.13% | 3.90% | 16.88% | 6.56% | |
68 Neutral | $3.02B | 17.61 | 188.17% | 1.76% | -2.83% | 26.75% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
60 Neutral | $3.87B | 32.87 | 8.99% | 6.69% | -4.95% | -34.47% | |
58 Neutral | $1.93B | -120.50 | -24.52% | 4.96% | 2.64% | -140.86% | |
55 Neutral | $2.44B | 23.40 | 5.06% | 2.81% | 6.72% | ― |
* Technology Sector Average
ADP
Automatic Data Processing
269.78
-21.56
-7.40%
NSP
Insperity
53.63
6.57
13.97%
MAN
ManpowerGroup
54.10
16.70
44.67%
PAYX
Paychex
117.67
-15.64
-11.73%
RHI
Robert Half
38.73
6.37
19.70%
TNET
TriNet Group
70.48
8.86
14.38%
Automatic Data Processing Corporate Events
Business Operations and StrategyPrivate Placements and Financing
ADP Secures New $9.2 Billion Credit Facilities
Positive
Jun 26, 2026
On June 26, 2026, Automatic Data Processing, Inc. entered into new committed credit facilities totaling $9.2 billion, comprising a $5.7 billion 364-day facility and a $3.5 billion five-year facility that includes a $500 million accordion feature. ...
Business Operations and StrategyPrivate Placements and FinancingRegulatory Filings and Compliance
Automatic Data Processing Completes $1 Billion Senior Notes Offering
Positive
May 7, 2026
On May 4, 2026, Automatic Data Processing, Inc. entered into an underwriting agreement with a syndicate of major banks to issue and sell $1 billion of 5.000% senior notes due 2036, with the sale conducted under an existing shelf registration. The ...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.