Automatic Data Processing (ADP)
NASDAQ:ADP
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Automatic Data Processing
(NASDAQ:ADP)
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Rating:76Outperform
Price Target:
$222.00
▲(17.59% Upside)
Action:ReiteratedDate:01/29/26
The score is driven primarily by strong financial quality (durable margins and solid cash generation) and a constructive earnings update (raised FY2026 guidance plus larger buyback and higher dividend). These positives are partially offset by weak technicals (downtrend with negative MACD and below key moving averages) and a valuation that is reasonable but not deeply discounted.
Positive Factors
Recurring HCM subscription and outsourced payroll revenue
ADP’s core revenue derives from recurring subscription and outsourced payroll fees, providing durable, predictable cash flows tied to employer headcount and module adoption. This business model supports high retention, steady renewals and upsell potential across HR, benefits and time modules, underpinning multi-year revenue visibility and scalable margins.
Negative Factors
Rising leverage and higher total debt
The material increase in leverage reduces financial flexibility and raises exposure to interest-rate and cash-flow shocks over the medium term. Higher debt levels may constrain capital choices during downturns, increase financing costs, and heighten the importance of sustaining operating cash flow to support dividends and buybacks.
Read all positive and negative factors
Positive Factors
Negative Factors
Recurring HCM subscription and outsourced payroll revenue
ADP’s core revenue derives from recurring subscription and outsourced payroll fees, providing durable, predictable cash flows tied to employer headcount and module adoption. This business model supports high retention, steady renewals and upsell potential across HR, benefits and time modules, underpinning multi-year revenue visibility and scalable margins.
Read all positive factors
Automatic Data Processing (ADP) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$76.02B
Dividend Yield2.46%
Average Volume (3M)3.80M
Price to Earnings (P/E)24.4
Beta (1Y)0.48
Revenue Growth7.07%
EPS Growth8.32%
CountryUS
Employees64,000
SectorTechnology
Sector Strength88
IndustryStaffing & Employment Services
Share Statistics
EPS (TTM)2.62
Shares Outstanding402,644,380
10 Day Avg. Volume2,637,342
30 Day Avg. Volume3,804,676
Financial Highlights & Ratios
PEG Ratio3.20
Price to Book (P/B)20.29
Price to Sales (P/S)6.11
P/FCF Ratio26.32
Enterprise Value/Market Cap1.03
Enterprise Value/Revenue3.70
Enterprise Value/Gross Profit7.66
Enterprise Value/Ebitda12.16
Forecast
1Y Price Target
$260.62Price Target Upside38.05% Upside
Rating ConsensusHold
Number of Analyst Covering13
EPS Forecast (FY)10.97
Revenue Forecast (FY)$21.80B
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-b...
How the Company Makes Money
ADP primarily makes money by charging employers recurring fees to run HR and payroll processes and to access its HCM software platforms, and by earning interest-related income on client funds it holds temporarily.
1) Employer Services (fees for H...
Automatic Data Processing Key Performance Indicators (KPIs)
Any
Revenue by Segment
Analyzes income from different business units, highlighting which areas drive growth and profitability, and indicating strategic focus and market positioning.
Analyzes income from different business units, highlighting which areas drive growth and profitability, and indicating strategic focus and market positioning.
Data provided by:
The Fly
The FlyAutomatic Data Processing Earnings Call Summary
Earnings Call Date:Jan 28, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Apr 29, 2026
Earnings Call Sentiment Positive
The call conveyed a predominantly positive tone: strong Q2 financial results, upward revisions to revenue and EPS guidance, record client satisfaction, meaningful product and AI momentum (Workforce Now NextGen, Lyric, ADP Assist), and a substantial $6B buyback and 10% dividend increase. Headwinds were noted in the PEO business (weaker underlying growth ex pass-throughs, 70 bps margin decline), a modest retention decline, and near-term margin cadence pressure driven by portfolio yield/timing effects. On balance, the highlights significantly outweigh the lowlights.Positive Updates
Strong Quarterly Financial Results
Q2 consolidated revenue growth of 6%; adjusted EBIT margin expansion of 80 basis points in the quarter; adjusted EPS growth of 11% year-over-year.
Negative Updates
PEO Underlying Growth and Margin Pressure
PEO revenue excluding zero-margin pass-throughs grew 3% in Q2. PEO margins decreased 70 basis points in the quarter, driven by growth in zero-margin pass-throughs and higher selling expenses. PEO new business bookings were solid but came in slightly below management expectations.
Read all updates
Q2-2026 Updates
Positive
Negative
Strong Quarterly Financial Results
Q2 consolidated revenue growth of 6%; adjusted EBIT margin expansion of 80 basis points in the quarter; adjusted EPS growth of 11% year-over-year.
Read all positive updates
Company Guidance
Management raised its fiscal 2026 consolidated revenue outlook to about 6% and increased adjusted EPS guidance to 9–10%, while maintaining expected adjusted EBIT margin expansion of 50–70 basis points (with more of the expansion weighted to Q4 than Q3) and an effective tax rate of ~23%; key Employer Services guidance includes new business bookings of 4–7%, ES revenue growth of about 6%, pays‑per‑control roughly flat for the year, a 10–30 basis point expected full‑year decline in retention, average client funds balances up 4–5% with an average yield of ~3.4%, client funds interest revenue now forecast at $1.31–1.33 billion (up $10M) and net benefit from the extended investment strategy at $1.27–1.29 billion (up $10M); PEO guidance calls for fiscal 2026 revenue growth of 5–7% (3–5% excluding zero‑margin pass‑throughs), average worksite employee growth of ~2%, and management noted Q2 PEO revenue +6% ( +3% ex pass‑throughs) with PEO margins down 70 bps in Q2; the company also announced a $6 billion share repurchase authorization (replacing $5B) and a 10% dividend increase.Automatic Data Processing Financial Statement Overview
Summary
Income Statement
92
Very Positive
Balance Sheet
71
Positive
Cash Flow
83
Very Positive
| Breakdown | TTM | Jun 2025 | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 21.21B | 20.56B | 19.20B | 18.01B | 16.50B | 15.01B |
| Gross Profit | 10.26B | 10.45B | 9.59B | 8.81B | 7.73B | 6.97B |
| EBITDA | 6.46B | 6.24B | 5.80B | 5.24B | 4.41B | 3.93B |
| Net Income | 4.24B | 4.08B | 3.75B | 3.41B | 2.95B | 2.60B |
Balance Sheet | ||||||
| Total Assets | 84.64B | 53.37B | 54.36B | 50.97B | 63.07B | 48.77B |
| Cash, Cash Equivalents and Short-Term Investments | 2.47B | 7.85B | 3.30B | 2.10B | 1.48B | 2.58B |
| Total Debt | 4.63B | 9.07B | 3.71B | 3.44B | 3.49B | 3.35B |
| Total Liabilities | 78.25B | 47.18B | 49.82B | 47.46B | 59.84B | 43.10B |
| Stockholders Equity | 6.39B | 6.19B | 4.55B | 3.51B | 3.23B | 5.67B |
Cash Flow | ||||||
| Free Cash Flow | 4.60B | 4.77B | 3.59B | 3.64B | 2.55B | 2.59B |
| Operating Cash Flow | 4.74B | 4.94B | 4.16B | 4.21B | 3.10B | 3.09B |
| Investing Cash Flow | -2.67B | -3.04B | -1.39B | -2.52B | -7.01B | -3.52B |
| Financing Cash Flow | 14.89B | -6.97B | -1.43B | -15.68B | 13.65B | 6.44B |
Automatic Data Processing Technical Analysis
Negative
188.79
Price Trends
213.50
Negative
234.40
Negative
260.98
Negative
Market Momentum
-5.32
Positive
27.61
Positive
15.77
Positive
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 188.79 is below the 20-day moving average (MA) of 204.25, below the 50-day MA of 213.50, and below the 200-day MA of 260.98, indicating a bearish trend. The MACD of -5.32 indicates Positive momentum. The RSI at 27.61 is Positive, neither overbought nor oversold. The STOCH value of 15.77 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 |
|---|---|---|---|---|---|---|---|
76 Outperform | $76.02B | 24.45 | 68.28% | 2.46% | 7.07% | 8.32% | |
75 Outperform | $30.66B | 15.02 | 40.94% | 3.70% | 12.37% | -7.18% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
59 Neutral | $2.39B | 20.45 | 10.26% | 8.65% | -7.27% | -43.88% | |
51 Neutral | $1.25B | ― | -0.65% | 4.96% | -2.44% | -156.01% | |
51 Neutral | $1.64B | 18.31 | 185.63% | 1.81% | 0.99% | -47.02% | |
45 Neutral | $944.34M | ― | -7.69% | 6.37% | 3.19% | -86.21% |
* Technology Sector Average
ADP
Automatic Data Processing
188.79
-105.37
-35.82%
NSP
Insperity
25.03
-54.71
-68.61%
MAN
ManpowerGroup
26.93
-22.63
-45.66%
PAYX
Paychex
85.57
-58.42
-40.57%
RHI
Robert Half
23.59
-22.70
-49.04%
TNET
TriNet Group
34.63
-43.47
-55.66%
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.