Automatic Data Processing (ADP)
Industrials · $118B market cap · SEC CIK 0000008670
ahead of 90% of the S&P 500 · #2 of 79 in Industrials
Next reports on Jan 26, 2027, with analysts expecting $2.94 in earnings per share.
52-week range $188.16 to $310.98. 2% below its 52-week high and 62% above its low.
The case for ADP
- Earns 76% on shareholder equity, a figure flattered by a small equity base.
- 20% of revenue drops through to net profit.
- Moves less than the market (beta 0.79).
- Pays a modest 2.4% dividend.
- Within 2% of its 52-week high: the trend is up.
The case against
- Priced at 20× book value. Very little hard asset backing here.
- Weakest against its peers: price/sales of 5.3× is higher than 78% of Industrials companies.
What the score is made of
Each factor is half a curve over reported figures and half a rank among the other Industrials companies (momentum is judged against fixed thresholds only), and the five are blended by weight. The score is where that blend places it in the S&P 500. It describes the last filing and the current price. It is not a forecast.
| Valuewhat you pay for the earnings and cash, against the growth you get | 54 |
|---|---|
| Growthhow fast revenue and earnings are moving, this year and over five | 56 |
| Profitabilityhow much of the revenue becomes profit, and how much of that is cash | 77 |
| Momentumhow the price has behaved lately | 80 |
| Stabilityhow violently it moves, what it owes and what it pays you | 85 |
- Capital spending is missing from its filings, so free cash flow cannot be worked out. Operating cash flow stands in for the cash test, against a stricter bar.
- Each factor except momentum is half fixed thresholds, half rank among the 79 Industrials companies.
The financials
Revenue growth
Is the business growing? Slowly
| Last 12 months | +6.5% |
|---|---|
| Over 5 years | +7.9% a year |
| FY2026 revenue | $21.9B (+7%) |
Free cash flow
Is it generating real cash? Can't tell: no capital spending in its filings
| FY2026 operating cash flow | $5.4B |
|---|---|
| Of profit, before capital spending | 123% |
Its filings do not give capital spending, so free cash flow cannot be worked out. Operating cash flow, which is before that spending, is shown instead, and the score judges it against a stricter bar.
Profit margins
Is profitability improving? Holding steady
| Gross margin | 47% |
|---|---|
| Operating margin | 27% |
| Net margin, FY25 → FY26 → now | 19.8% → 20.1% → 20.3% |
Debt vs. cash
Is the balance sheet healthy? Yes, the debt is manageable
| Cash | $4.2B |
|---|---|
| Long-term debt | $5.0B |
| Net debt | $734M |
| Years to repay | 0.9 yrs |
Valuation
Is the stock price reasonable? Yes, about fair
| P/E | 26.1× |
|---|---|
| Fair P/E for its growth | 25× |
| P/FCF | n/a |
| Forward P/E | 23.1× |
| EV / EBITDA | 18.4× |
At 26.1× earnings it trades close to the 25× that 9% a year of growth plus a 2.4% dividend would justify.
The financials, five years deep
Pulled from Automatic Data Processing's XBRL filings on SEC EDGAR. Italic rows are worked out from the others.
| FY2026 | FY2025 | FY2024 | FY2023 | FY2022 | |
|---|---|---|---|---|---|
| Revenue growth | |||||
| Revenue | $21.9B | $20.6B | $19.2B | $18.0B | $16.5B |
| Change on the year | +7% | +7% | +7% | +9% | — |
| Profit margins | |||||
| Net margin | 20.1% | 19.8% | 19.5% | 18.9% | 17.9% |
| Debt vs. cash | |||||
| Cash | $4.2B | $3.3B | $2.9B | $2.1B | $1.4B |
| Long-term debt | $5.0B | $4.0B | $3.0B | $3.0B | $3.0B |
| Net cash (debt) | −$734M | −$627M | −$77.9M | −$906M | −$1.6B |
What Automatic Data Processing says it does
CORPORATE BACKGROUND General In 1949, our founders established ADP with a simple, innovative idea: help clients focus on their business by solving their payroll challenges. In the 77 years since, we have led the Human Capital Management (“HCM”) industry in innovation. We were the first in HCM to deliver automation, move to the cloud, provide a mobile app, and create an online marketplace. Today, we continue that legacy with artificial intelligence (“AI”), building AI into the very core of how we orchestrate, govern and execute HR and pay processes for real-world outcomes. As AI adds new layers of complexity to managing the workforce infrastructure that makes business possible, our clients need a partner they can trust. As the trusted, service-driven, and AI-enabled partner for HCM, we deliver services powered by deep domain expertise, workforce data, and global scale to help organizations manage their most critical workforce functions…
Risk factors ADP lists in its 10-K
- If we fail to protect our intellectual property rights, it could materially adversely affect our business and our brand
- We may be sued by third parties for infringement of their proprietary rights, which could have a materially adverse effect on our business, financial condition or results of operations
- Our systems, applications, solutions and services may be subject to disruptions that could have a materially adverse effect on our business, operations, financial condition, results of operations or reputation
- A disruption of the data centers or cloud-computing or other technology services or systems that we utilize could have a materially adverse effect on our business, operations, financial condition or results of operations
- A major natural disaster or catastrophic event could have a materially adverse effect on our business, operations, financial condition and results of operations, or have other adverse consequences
- factors may materially adversely affect our business and financial results
- Change in our credit ratings could adversely impact our operations and lower our profitability
- Our business could be negatively impacted as a result of actions by activist stockholders or others
- We may be unable to attract and retain qualified personnel