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Automatic Data Processing
(NASDAQ:ADP)
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Rating:77Outperform
Price Target:
$246.00
â–²(22.71% Upside)
Action:Reiterated
Date:06/27/26
ADP scores well primarily on strong financial performance (durable margins and excellent free-cash-flow conversion) and a constructive earnings update with raised full-year guidance. The score is tempered by a mixed technical picture (below key moving averages) and only moderately attractive valuation, while recent financing actions modestly improve flexibility but keep leverage monitoring relevant.
Positive Factors
Cash generation
ADP converts earnings into cash at a very high rate (FCF nearly equals net income), producing roughly $5.3B FCF TTM. Durable, high cash conversion supports sustained investment in product development, dividends and buybacks, and provides a buffer through industry cycles.
Negative Factors
PEO margin volatility
PEO margins fell ~120bps due to higher zero-margin pass-throughs, SUI costs, selling expenses and reserve movements. Because PEO economics are exposed to pass-through mixes and workers' comp dynamics, margins here can be structurally more volatile and weigh on consolidated margin predictability.
Read all positive and negative factors
Positive Factors
Negative Factors
Cash generation
ADP converts earnings into cash at a very high rate (FCF nearly equals net income), producing roughly $5.3B FCF TTM. Durable, high cash conversion supports sustained investment in product development, dividends and buybacks, and provides a buffer through industry cycles.
Read all positive factors
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 (ADP) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$96.84B
Dividend Yield2.46%
Average Volume (3M)2.75M
Price to Earnings (P/E)22.5
Beta (1Y)0.49
Revenue Growth6.92%
EPS Growth9.71%
CountryUS
Employees64,000
SectorTechnology
Sector Strength88
IndustryStaffing & Employment Services
Share Statistics
EPS (TTM)10.76
Shares Outstanding399,734,280
10 Day Avg. Volume2,795,663
30 Day Avg. Volume2,747,005
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 Cap0.91
Enterprise Value/Revenue4.10
Enterprise Value/Gross Profit8.63
Enterprise Value/Ebitda13.59
Forecast
1Y Price Target
$244.14Price Target Upside21.79% Upside
Rating ConsensusHold
Number of Analyst Covering14
EPS Forecast (FY)12.19
Revenue Forecast (FY)$23.17B
Automatic Data Processing Business Overview & Revenue Model
Company Description
Automatic Data Processing, Inc. (ADP) is a global provider of cloud-based solutions designed for human capital management (HCM). The company organizes its operations into two primary segments: Employer Services and Professional Employer Organizati...
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:Apr 29, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:Aug 05, 2026
Earnings Call Sentiment Positive
The call conveyed a predominantly positive tone: ADP delivered strong Q3 financial results (7% revenue growth, ~80 bps adjusted EBIT margin expansion, ~10% adjusted EPS growth), raised full‑year revenue and EPS guidance, and highlighted tangible AI‑driven productivity gains and record client retention/satisfaction. Challenges were concentrated in the PEO business where margins fell (~120 bps) due to pass‑through mix, SUI costs, selling expenses and some less favorable reserve movements, and management noted some near‑term FX moderation and booking outcome sensitivity. On balance, the positive operational momentum, upgraded outlook, measurable AI efficiencies, and strong client metrics outweigh the segment‑specific headwinds.Positive Updates
Top-Line Growth and Raised Outlook
Reported consolidated revenue growth of 7% in Q3; company raised full-year consolidated revenue growth guidance to 6%–7% following the quarter.
Negative Updates
PEO Margin Pressure in the Quarter
PEO margins decreased ~120 basis points in Q3, driven by growth in zero‑margin pass‑throughs, higher SUI costs, and elevated selling expenses; PEO margins came in below the team's model for the quarter.
Read all updates
Q3-2026 Updates
Positive
Negative
Top-Line Growth and Raised Outlook
Reported consolidated revenue growth of 7% in Q3; company raised full-year consolidated revenue growth guidance to 6%–7% following the quarter.
Read all positive updates
Company Guidance
ADP raised its fiscal 2026 outlook after a strong Q3 (revenue +7%, adjusted EBIT margin expansion +80 bps, adjusted EPS +10%) and now expects consolidated revenue growth of 6–7% for the year; Employer Services revenue is expected to grow 6–7% (ES pays-per-control ~1%), with ES retention now forecast to be flat to down 20 bps (guidance improved 10 bps). The company increased its average client funds balances growth forecast to about 6% (Q3 balances +9%), expects an average yield of ~3.4%, and raised client funds interest revenue by $25M to $1.34–1.35B (and the midpoint of extended investment strategy impact by $25M to $1.30–1.31B). PEO revenue grew 7% in Q3 (PEO ex zero-margin pass-throughs +5%) and ADP now expects PEO revenue ex pass-throughs to grow 4–5% with average worksite employee growth of ~2%. ADP also updated full-year targets to 70–80 bps of adjusted EBIT margin expansion, 10–11% adjusted EPS growth, an effective tax rate around 23%, and plans to continue share repurchases at or above current elevated levels.Automatic Data Processing Financial Statement Overview
Summary
Income Statement
86
Very Positive
Balance Sheet
71
Positive
Cash Flow
88
Very Positive
| Breakdown | TTM | Jun 2025 | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 21.60B | 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 | 6.51B | 6.24B | 5.80B | 5.24B | 4.41B | 3.93B |
| Net Income | 4.35B | 4.08B | 3.75B | 3.41B | 2.95B | 2.60B |
Balance Sheet | ||||||
| Total Assets | 64.48B | 53.37B | 54.36B | 50.97B | 63.07B | 48.77B |
| Cash, Cash Equivalents and Short-Term Investments | 3.23B | 7.85B | 3.30B | 2.10B | 1.48B | 2.58B |
| Total Debt | 4.30B | 9.07B | 3.71B | 3.44B | 3.49B | 3.35B |
| Total Liabilities | 58.13B | 47.18B | 49.82B | 47.46B | 59.84B | 43.10B |
| Stockholders Equity | 6.35B | 6.19B | 4.55B | 3.51B | 3.23B | 5.67B |
Cash Flow | ||||||
| Free Cash Flow | 5.15B | 4.77B | 3.59B | 3.64B | 2.55B | 2.59B |
| Operating Cash Flow | 5.45B | 4.94B | 4.16B | 4.21B | 3.10B | 3.09B |
| Investing Cash Flow | -3.33B | -3.04B | -1.39B | -2.52B | -7.01B | -3.52B |
| Financing Cash Flow | 2.24B | -6.97B | -1.43B | -15.68B | 13.65B | 6.44B |
Automatic Data Processing Technical Analysis
Positive
200.47
Price Trends
217.59
Positive
212.08
Positive
236.27
Positive
Market Momentum
3.38
Negative
69.10
Neutral
90.44
Negative
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 200.47 is below the 20-day moving average (MA) of 225.02, below the 50-day MA of 217.59, and below the 200-day MA of 236.27, indicating a bullish trend. The MACD of 3.38 indicates Negative momentum. The RSI at 69.10 is Neutral, neither overbought nor oversold. The STOCH value of 90.44 is Negative, 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 |
|---|---|---|---|---|---|---|---|
77 Outperform | $96.84B | 22.52 | 68.69% | 2.46% | 6.92% | 9.71% | |
75 Outperform | $37.82B | 21.66 | 40.94% | 3.70% | 16.88% | 6.56% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
58 Neutral | $2.54B | 16.48 | 179.66% | 1.81% | -1.40% | -0.67% | |
55 Neutral | $3.42B | 25.75 | 10.14% | 8.65% | -6.08% | -35.51% | |
54 Neutral | $1.80B | -110.83 | -0.81% | 4.96% | 4.77% | -115.03% | |
52 Neutral | $1.73B | -67.72 | -32.05% | 6.37% | 3.04% | -140.22% |
* Technology Sector Average
ADP
Automatic Data Processing
242.27
-57.79
-19.26%
NSP
Insperity
45.37
-10.59
-18.93%
MAN
ManpowerGroup
38.79
-2.14
-5.23%
PAYX
Paychex
106.35
-33.57
-23.99%
RHI
Robert Half
33.48
-4.33
-11.46%
TNET
TriNet Group
55.21
-14.85
-21.20%
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.