ADP  Automatic Data Processing Inc.

Exchange

NASDAQ

Sector

Technology

Industry

EDP Services

Market Cap.

52.00B

Vuru Grade

62.62/100

Current Price

$117.01
+1.08 (+0.93%)

Growth Price

$33.16
Overvalued by 71.66%

Stability Price

$27.29
Overvalued by 76.68%

Company Metrics

  • P/E 30.39
  • P/S 4.16
  • P/B 12.97
  • EPS 3.85
  • Cash ROIC 32.37%
  • Cash Ratio 0.09
  • Dividend 2.28 / 1.97%
  • Avg. Vol. 4.41M
  • Shares 444.41M
  • Market Cap. 52.00B

Company Description

Automatic Data Processing, Inc. provides technology-based outsourcing solutions to employers, and vehicle retailers and manufacturers worldwide. It operates in three segments: Employer Services, Professional Employer Organization Services, and Dealer Services. The Employer Services segment offers a range of human resource (HR)information, payroll processing, and tax and benefits administration sol... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Glass Lewis backs Ackman candidates in ADP proxy fight
Seeking Alpha - 10 hours ago
Proxy advisory firm Glass Lewis has given a lift to Bill Ackman's proxy fight against Automatic Data Processing (ADP +1.1%), recommending that shareholders vote for all three dissident board candidates nominated by Pershing Square. Glass Lewis is the ...
Bill Ackman Wins Advisers' Support in Push for Change at ADP - Bloomberg
Picking Sides: Glass Lewis Sides with Ackman Over ADP - Barron's
Automatic Data Processing: Consistent Earner
Seeking Alpha - Sep 25, 2017
Although the shares of Automatic Data Processing (ADP) are up about 21% over the past twelve months, in my view, there's more upside ahead.
Automatic Data Processing (ADP) Lifted to “Buy” at BidaskClub - The Ledger Gazette
Revenue Forecast of Automatic Data Processing, Inc. (ADP) - TRA
Ackman: ADP should buy Ceridian
Seeking Alpha - Oct 20, 2017
Bill Ackman -- keeping up the beat for improvements he says are needed at Automatic Data Processing (ADP +0.5%) -- says the firm should look at buying its rival Ceridian in a bid to offer an improved product and stem defections.
Deals of the day-Mergers and acquisitions (ETFC, ADP, ROSN, 003620, BBD., N21) - Markets Insider
ADP Acquires Global Cash Card For Digital Payments
Seeking Alpha - Oct 10, 2017
Global Cash has developed a range of paycard solutions for business and government use cases. ADP will add Global Cash's offerings to its ALINE product and expand into younger demographics, the underbanked and the gig economy workforce.
ADP acquires payment card firm as proxy fight wears on - Staffing Industry Analysts
Ackman presses ADP fight at WSJ conference
Seeking Alpha - Oct 17, 2017
Pershing Square's Bill Ackman is working to keep the heat on Automatic Data Processing (ADP -0.8%) in their proxy fight, saying the company is worried more about "making its numbers" than developing technology.
Ackman Cranks Up Pressure on ADP - Wall Street Journal
Ackman, ADP Board Nominees to Discuss Plans for Company Thursday - New York Times
Dividend Aristocrats In Focus Part 4: ADP
Seeking Alpha - Oct 5, 2017
Automatic Data Processing (ADP) might not be a household name. But it should be, at least for income investors. Automatic Data Processing, or ADP for short, has raised its dividend each year for 42 years in a row. Its most recent increase was on ...
Ackman's Makes 4 Compelling Arguments Why ADP Can And Should Step Up Its Game
Seeking Alpha - Oct 12, 2017
To convince Automatic Data Processing (ADP) shareholders to vote for his board nominees, Pershing Square's (OTCPK:PSHZF) Bill Ackman launched an hour-long presentation detailing areas of improvement.
Bill Ackman explains why he's not impressed by ADP's triple-digit return - Yahoo Finance
ADP retail investors to get a chance to grill Ackman - DeathRattleSports.com
Institutional Ownership And Insider Trading At Automatic Data Processing, Inc ...
Economic News - 8 hours ago
Automatic Data Processing, Inc. (NASDAQ:ADP) has seen its stock price gain 13.15, or +12.79%, so far in 2017. In the past 3-month period alone, shares of ADP have appreciated +12.59 - or +12.18%. The stock's 52-week range is $85.48 to $121.77, and its ...
As Automatic Data Processing In (ADP) Shares Declined, Fifth Third Bancorp Has ... - BZ Weekly
Pershing Square Letter - Nominees For ADP's Transformation
Seeking Alpha - Sep 29, 2017
Despite the large opportunity for improvement, ADP's board and management have made clear that they are committed to the status quo, recently releasing a "plan" which projects no improvement in its annual margin improvement targets.
Automatic Data Processing Is Moving Higher -- Carefully
TheStreet.com - Oct 5, 2017
Automatic Data Processing Inc. (ADP) has gotten a lot of media attention ever since Pershing Square, a.k.a. Bill Ackman, announced this summer its investment in the company.
Bill Ackman's New Question To ADP: Why Is Revenue Productivity Lower Versus ... - Benzinga
ADP calls out Bill Ackman for flip-flopping - New York Post
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for ADP to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate ADP's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$117.01 Current Price

$33.16 Growth Price (DCF)

Overvalued by 71.66%


Growth Rate Assumed by Market: 36.35%


Future Free Cash Flow Growth Rate: 0.3%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$27.29 Stability Price (EPV)

Overvalued by 76.68%


Discount Rate: 15.0%

$49.12 Book Price

Overvalued by 58.02%


Excellent Cash Return on Invested Capital over the past 5 years

ADP has efficiently invested its financial resources in buildings, projects, and equipment, resulting in strong returns. Annual Reports can be useful in identifying the cause of one-time events and future sustainability.

ADP has created $32.37 of cash for every $100 invested.
Figures in USD. Fiscal year ends in June
20132014201520162017
Free Cash Flow 1.29B 1.45B 1.57B 1.47B 1.66B
divided by
Invested Capital 5.81B 4.13B 4.33B 4.61B 4.58B
Cash ROIC 22.28% 35.22% 36.25% 31.99% 36.11%

Excellent Return on Equity over the past 5 years

Over the past 5 years, ADP has generated strong profits with money shareholders have invested. This is considered one of the best indicators of quality management. Beware of extremely high Return on Equity (> 50%) as this is often unsustainable.

ADP has generated $30.51 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in June
20132014201520162017
Net Income 1.41B 1.52B 1.45B 1.49B 1.73B
divided by
Stockholders' Equity 6.19B 6.67B 4.81B 4.48B 3.98B
Return on Equity 22.71% 22.73% 30.21% 33.30% 43.59%

Excellent Business Performance over the past 10 years

ADP has been able to maintain profitability in good times and bad. This could mean ADP has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

ADP has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Free Cash Flow 1.51B 1.40B 1.58B 1.52B 1.66B 1.29B 1.45B 1.57B 1.47B 1.66B

Weak Balance Sheet

ADP's financial position is not ideal. The key is to check whether ADP is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Cash 1.58B 2.30B 1.67B 1.43B 1.58B 1.73B 4.02B 1.67B 3.21B 2.78B
Current Assets 18.81B 20.70B 22.32B 28.58B 25.16B 26.20B 25.83B 28.81B 39.50B 32.66B
Total Assets 23.73B 25.35B 26.86B 34.24B 30.82B 32.27B 32.05B 33.11B 43.67B 37.18B
Current Liabilities 17.34B 18.76B 20.05B 26.79B 23.24B 24.73B 23.91B 27.11B 35.85B 29.82B
Total Liabilities 18.65B 20.03B 21.38B 28.23B 24.70B 26.08B 25.38B 28.30B 39.19B 33.20B
Stockholder' Equity 5.09B 5.32B 5.48B 6.01B 6.11B 6.19B 6.67B 4.81B 4.48B 3.98B
Current Ratio 1.08 1.10 1.11 1.07 1.08 1.06 1.08 1.06 1.10 1.10
TL-to-TA 0.79 0.79 0.80 0.82 0.80 0.81 0.79 0.85 0.90 0.89

Low or No Reinvestment of Profits over the past 10 years

ADP has either been retaining a small amount of their earnings or has done so inconsistently. A lack of consistency could be due to ADP operating at a loss or them having such a strong economic moat they feel comfortable spending profits on growth. Be wary of future prospects and if applicable, inspect the moat's sustainability.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Retained Earnings 10.03B 10.72B 11.25B 11.80B 12.44B 13.02B 13.63B 13.46B 14.00B 14.73B
Retained Earnings Growth - 6.85% 5.00% 4.90% 5.37% 4.68% 4.70% -1.27% 4.03% 5.18%

Potential Competitive Advantage over the past 10 years

ADP potentially has a competitive advantage. This could be strong branding, the ability to keep costs low, or some other characteristic that is hard to replicate. Look at its future prospects to determine sustainability and whether the economic moat will strengthen.

$13.33 of every $100 of Revenue have been pure profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Net Income 1.24B 1.33B 1.21B 1.25B 1.39B 1.41B 1.52B 1.45B 1.49B 1.73B
divided by
Revenue 8.78B 8.87B 8.93B 9.88B 10.67B 11.31B 12.21B 10.94B 11.67B 12.38B
Net Profit Margin 14.08% 15.03% 13.57% 12.69% 13.02% 12.43% 12.42% 13.28% 12.79% 14.00%

Strong Pricing Power over the past 10 years

ADP has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. This potentially leaves flexibility in inflationary environments to raise prices on consumers and maintain profitability.

$43.39 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Gross Profit 4.86B 4.03B 3.90B 4.15B 4.43B 4.66B 4.99B 4.51B 4.83B 5.11B
divided by
Revenue 8.78B 8.87B 8.93B 9.88B 10.67B 11.31B 12.21B 10.94B 11.67B 12.38B
Gross Margin 55.38% 45.42% 43.66% 41.99% 41.49% 41.21% 40.84% 41.24% 41.37% 41.28%

Low Capital Intensity over the past 10 years

ADP has consistently used a small portion of their Net Income buying new equipment or investing in new facilities. This indicates that ADP may require minimal investment to stay competitive. This leaves them with extra money to spend on growing their business and potentially buying back stock.

19.58% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Capital Expenditure 277.60M 157.90M 102.90M 181.90M 249.60M 282.90M 367.70M 335.50M 386.00M 470.60M
divided by
Net Income 1.24B 1.33B 1.21B 1.25B 1.39B 1.41B 1.52B 1.45B 1.49B 1.73B
Capital Expenditure Ratio 22.46% 11.85% 8.49% 14.50% 17.98% 20.12% 24.26% 23.10% 25.86% 27.15%

Very Strong Dividend History over the past 10 years

ADP has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests ADP is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Dividend Paid 548.90M 629.40M 673.40M 692.40M 739.70M 805.50M 883.10M 927.60M 943.60M 995.20M
divided by
Shares Outstanding 527.20M 505.80M 503.70M 498.30M 492.20M 487.10M 483.10M 475.80M 459.10M 450.30M
Dividend Paid Per Share 1.04 1.24 1.34 1.39 1.50 1.65 1.83 1.95 2.06 2.21
Price at Year End 35.54 40.68 45.10 54.01 56.33 81.08 84.13 86.38 102.78 97.17
Dividend Yield 2.93% 3.06% 2.96% 2.57% 2.67% 2.04% 2.17% 2.26% 2.00% 2.27%

Strong History of Stock Buybacks over the past 10 years

ADP has a strong history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in June
2008200920102011201220132014201520162017
Shares Outstanding 527.20M 505.80M 503.70M 498.30M 492.20M 487.10M 483.10M 475.80M 459.10M 450.30M
Stock Bought Back - 4.23% 0.42% 1.08% 1.24% 1.05% 0.83% 1.53% 3.64% 1.95%
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