Automatic Data Processing (ADP) AI Stock Analysis

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Automatic Data Processing

(NASDAQ:ADP)

Rating:76Outperform

Price Target:

$345.00

▲(12.03% Upside)

ADP's overall stock score is driven by strong financial performance and positive earnings call insights, highlighting robust revenue and EPS growth, high retention rates, and strategic advancements. However, technical analysis and valuation indicate some caution due to bearish momentum signals and a high P/E ratio. The company's high leverage and slowing revenue growth rate are potential risks that need to be managed.

Positive Factors

Financial Performance

ADP posted a solid operational close with clean beats across revenue and margin.

Market Position

ADP is the market share leader in payroll and PEOs, offering key use cases for HR management.

Negative Factors

Competitive Pressure

Intensifying competition could create downward pressure on product pricing.

Stock Valuation

Shares are trading at the high end of their historical P/E range, leaving analysts looking for a more attractive entry.

Automatic Data Processing (ADP) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$124.73B

Dividend Yield1.95%

Average Volume (3M)1.45M

Price to Earnings (P/E)30.9

Beta (1Y)0.59

Revenue Growth7.07%

EPS Growth9.66%

CountryUS

Employees64,000

SectorTechnology

Sector Strength84

IndustryStaffing & Employment Services

Share Statistics

EPS (TTM)2.26

Shares Outstanding405,043,150

10 Day Avg. Volume1,376,922

30 Day Avg. Volume1,447,795

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)N/A

P/FCF RatioN/A

Enterprise Value/Market Cap1.02

Enterprise Value/Revenue6.18

Enterprise Value/Gross Profit12.24

Enterprise Value/Ebitda20.13

Forecast

1Y Price Target

$324.50

Price Target Upside5.37% Upside

Rating ConsensusHold

Number of Analyst Covering12

Automatic Data Processing Business Overview & Revenue Model

Company DescriptionAutomatic 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 MoneyADP generates revenue primarily through its comprehensive suite of HCM solutions, which are offered on a subscription basis. The company has several key revenue streams, including payroll services, which constitute a significant portion of its earnings, as well as services related to tax filing, human resources, and insurance services. ADP also offers additional services such as time and attendance management, talent acquisition, and employee benefits administration, which further contribute to its revenue. Furthermore, ADP leverages partnerships with various technology companies to enhance its product offerings and expand its market reach. The recurring nature of its subscription model provides a stable revenue stream, while its extensive client base in diverse industries helps mitigate risks associated with economic fluctuations.

Automatic Data Processing Key Performance Indicators (KPIs)

Any

Revenue by Segment

Revenue by Segment
Analyzes income from different business units, highlighting which areas drive growth and profitability, and indicating strategic focus and market positioning.

Chart InsightsADP's Employer Services segment shows robust growth, driven by strong retention rates and strategic investments, despite underperformance in new business bookings. The PEO Services segment maintains steady growth, bolstered by increased worksite employees, although margin pressures persist. The 'Other' segment remains volatile but less impactful. The earnings call highlights ADP's positive outlook for fiscal 2026, with expected revenue and EPS growth supported by AI integration and strategic acquisitions, despite challenges from a moderating macroeconomic environment and ongoing margin pressures.

Data provided by:

Main Street Data

Automatic Data Processing Earnings Call Summary

Earnings Call Date:Jul 30, 2025

(Q4-2025)

% Change Since: -0.22%|

Next Earnings Date:Oct 22, 2025

Earnings Call Sentiment Neutral

ADP delivered strong financial performance and high retention rates, along with strategic advancements in technology and acquisitions. However, there were challenges in meeting new business bookings expectations and PEO margin contraction. The outlook for fiscal 2026 anticipates continued growth but with a cautious approach due to macroeconomic uncertainties.

Q4-2025 Updates

Positive Updates

Strong Financial Performance

ADP reported a strong fourth quarter with 8% revenue growth, 40 basis points of adjusted EBIT margin expansion, and 8% adjusted EPS growth. The full year results included 7% revenue growth, 50 basis points of adjusted EBIT margin expansion, and 9% adjusted EPS growth.

High Employer Services Retention

Employer Services retention exceeded expectations, increasing 10 basis points to 92.1% for the year, approaching a record-high of 92.2%.

Growth in PEO New Business Bookings

PEO new business bookings growth accelerated in the fourth quarter and for the full year, contributing to fiscal 2025 PEO revenue growth of 7% at the high end of expectations.

Innovation and AI Integration

ADP Lyric HCM client sales increased by more than 50% in fiscal '25. ADP continued the rollout of ADP Assist, integrating AI-driven capabilities into products with millions of client interactions.

Strategic Acquisitions

ADP enhanced its global payroll capabilities by acquiring PEI in Mexico and WorkForce Software, which enhanced capabilities in the time and attendance space.

Negative Updates

Underperformance in New Business Bookings

Employer Services new business bookings grew by only 3%, below expectations, affected by a softer finish in the Employer Services HR Outsourcing business.

PEO Margin Contraction

PEO margins contracted by 60 basis points for the full year, mainly due to higher zero-margin pass-through benefits revenues and an increase in state unemployment insurance costs.

Moderate Revenue Growth Outlook for Fiscal 2026

ADP expects a slight moderation in the macroeconomic environment, with anticipated revenue growth of 5% to 6% and adjusted EBIT margin expansion of 50 to 70 basis points.

Company Guidance

During ADP's Fourth Quarter Fiscal 2025 earnings call, Maria Black, President and CEO, highlighted key metrics, including an 8% revenue growth and a 40 basis points increase in adjusted EBIT margin for the quarter, alongside an 8% rise in adjusted EPS. For the full fiscal year, ADP achieved 7% revenue growth, a 50 basis points expansion in adjusted EBIT margin, and a 9% increase in adjusted EPS. Employer Services new business bookings grew by 3% to approximately $2.1 billion, despite a difficult macroeconomic environment. Employer Services retention reached a notable 92.1%, with client satisfaction scores hitting record highs. The PEO segment saw a 7% revenue growth, supported by a 3% increase in average worksite employees. Looking ahead to fiscal 2026, ADP anticipates consolidated revenue growth between 5% and 6% and adjusted EBIT margin expansion of 50 to 70 basis points, while continuing to invest in strategic priorities like AI and global offerings.

Automatic Data Processing Financial Statement Overview

Summary

ADP shows strong financial health with consistent revenue and profit growth, efficient operational management, and robust cash flow generation. However, high leverage and slowing revenue growth rate are potential concerns.

Income Statement

Very Positive

ADP has demonstrated consistent revenue growth with a 1.77% increase in the latest year, supported by strong gross and net profit margins of 50.84% and 19.84%, respectively. The EBIT and EBITDA margins are also robust at 27.99% and 30.36%, indicating efficient operational management. However, the revenue growth rate has slowed compared to previous years, which could be a potential concern if the trend continues.

Balance Sheet

Positive

The company's balance sheet shows a high debt-to-equity ratio of 1.46, indicating significant leverage, which could pose a risk if not managed properly. However, the return on equity is strong at 65.93%, reflecting effective use of equity to generate profits. The equity ratio is lower, suggesting a higher reliance on debt financing.

Cash Flow

Positive

ADP's cash flow is strong, with a free cash flow growth rate of 5.55% and a high free cash flow to net income ratio of 96.58%, indicating efficient cash generation relative to net income. The operating cash flow to net income ratio is lower, suggesting room for improvement in converting net income into cash flow.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	20.56B	20.56B	19.20B	18.01B	16.50B	15.01B
Gross Profit	10.38B	10.45B	9.59B	8.81B	7.73B	6.97B
EBITDA	6.32B	6.24B	5.80B	5.24B	4.41B	3.93B
Net Income	4.08B	4.08B	3.75B	3.41B	2.95B	2.60B
Balance Sheet
Total Assets	53.37B	53.37B	54.36B	50.97B	63.07B	48.77B
Cash, Cash Equivalents and Short-Term Investments	7.85B	7.85B	2.91B	2.10B	1.47B	2.58B
Total Debt	9.07B	9.07B	3.71B	3.44B	3.49B	3.35B
Total Liabilities	47.18B	47.18B	49.82B	47.46B	59.84B	43.10B
Stockholders Equity	6.19B	6.19B	4.55B	3.51B	3.23B	5.67B
Cash Flow
Free Cash Flow	4.77B	4.77B	3.59B	3.64B	2.55B	2.59B
Operating Cash Flow	4.94B	4.94B	4.16B	4.21B	3.10B	3.09B
Investing Cash Flow	-3.04B	-3.04B	-1.39B	-2.52B	-7.01B	-3.52B
Financing Cash Flow	-6.97B	-6.97B	-1.43B	-15.68B	13.65B	6.44B

Automatic Data Processing Technical Analysis

Technical Analysis Sentiment

Positive

Last Price307.95

Price Trends

50DMA

305.09

Positive

100DMA

305.42

Positive

200DMA

301.53

Positive

Market Momentum

MACD

0.12

Negative

RSI

54.36

Neutral

STOCH

74.95

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 307.95 is above the 20-day moving average (MA) of 304.56, above the 50-day MA of 305.09, and above the 200-day MA of 301.53, indicating a bullish trend. The MACD of 0.12 indicates Negative momentum. The RSI at 54.36 is Neutral, neither overbought nor oversold. The STOCH value of 74.95 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

Overall Rating

UnderperformOutperform

Sector (68)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ADP	76 Outperform	$124.73B	30.85	76.00%	1.95%	7.07%	9.66%
Sector *	68 Neutral	¥240.40B	15.22	6.64%	2.40%	9.16%	-0.15%
PAYX	66 Neutral	$50.73B	30.76	41.80%	2.93%	5.56%	-1.91%
MAN	60 Neutral	$1.93B	18.36	-0.78%	5.09%	-3.79%	-138.56%
RHI	60 Neutral	$3.86B	21.67	12.75%	5.90%	-6.95%	-41.84%
TNET	58 Neutral	$3.19B	22.38	139.13%	1.52%	1.39%	-50.47%
NSP	49 Neutral	$2.09B	53.08	31.50%	4.32%	2.40%	-75.66%

* Technology Sector Average

Performance Comparison

ADP

Automatic Data Processing

307.95

42.11

15.84%

NSP

Insperity

55.60

-35.26

-38.81%

MAN

ManpowerGroup

44.42

-26.20

-37.10%

PAYX

Paychex

140.81

14.20

11.22%

RHI

Robert Half

37.94

-24.61

-39.34%

TNET

TriNet Group

69.00

-30.82

-30.88%

Automatic Data Processing Corporate Events

Private Placements and FinancingBusiness Operations and Strategy

Automatic Data Processing Secures $7.05 Billion Credit Agreements

Neutral

Jun 27, 2025

On June 27, 2025, Automatic Data Processing, Inc. entered into new credit agreements totaling $7.05 billion, replacing previous facilities. These agreements, which include a $4.55 billion 364-Day Facility and a $2.5 billion Five-Year Facility, are designed to enhance the company’s financial flexibility and support general corporate purposes. The new facilities, led by major financial institutions, offer revolving credit options and include terms similar to the previous agreements, with customary covenants and events of default. The agreements reflect ADP’s strategic financial management and its ongoing relationships with key lenders, potentially impacting its operational capabilities and market positioning.

Business Operations and Strategy

Automatic Data Processing to Host 2025 Investor Day

Neutral

Jun 12, 2025

Automatic Data Processing, Inc. announced it will host its 2025 Investor Day on June 12, 2025, in New York, with a presentation starting at 9:00 am ET. The event will be webcast live on the company’s website, offering stakeholders insights into the company’s strategic direction and operational focus, potentially impacting its market positioning and investor relations.

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.Date of analysis: Aug 20, 2025