Automatic Data Processing (ADP)
Technology · NASDAQ · US
Fundamentals
Valuation and ratings
Automatic Data Processing trades at $256.56, close to the $259.96 our discounted cash flow model puts on the business. On this measure the market and the model broadly agree, so the interesting question is which of them is wrong.
Our moat model scores it 79 out of 100, which is a wide moat. A moat is a structural reason competitors cannot take the profits away, and it matters more to a long holding period than any single quarter's numbers do.
It changes hands at 22.6 times earnings. Be careful reading that in isolation: for a cyclical business a low P/E arrives at the top of the cycle, when profits are peaking and about to fall, which is exactly when the shares look cheapest and are not.
About Automatic Data Processing
Automatic Data Processing, Inc. provides cloud-based human capital management (HCM) 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. This segment's offerings include RUN Powered by ADP, a software platform for small business payroll, HR, and compliance; ADP Workforce Now, a HCM solution used across mid-sized and large businesses to manage employees; and ADP Lyric HCM, a solution for HR management, payroll, workforce management, talent, and data analytics. The PEO Services segment provides HR and employment administration outsourcing solutions under ADP TotalSource name to businesses through a co-employment model. The segment also provides guidance, user-friendly technology, comprehensive employee benefits, and a risk management, safety, and workers' compensation program. The company was founded in 1949 and is headquartered in Roseland, New Jersey.
ADP passes 6 of our 30 screens today
Each screen prints the exact criteria it used, and the circumstances in which it is wrong.
Smart money ownership
21 of the funds we track reported a position in their latest SEC 13F filing. Largest first:
- Capital Research Global, Capital Research Global Investors$1.74B · 0.3% of book
- Terry Smith, Fundsmith LLP$783.28M · 6.1% of book
- First Eagle, First Eagle Investment Management, LLC$579.02M · 1.0% of book
- Two Sigma, TWO SIGMA INVESTMENTS, LP$260.52M · 0.2% of book
- D. E. Shaw, D. E. Shaw & Co., Inc.$240.88M · 0.1% of book
A word of warning on reading these figures: a 13F reports the market value of a holding, so a fund that traded nothing at all still appears to have sold when the price fell. We found 102 companies where the standard reading gives the opposite answer. Only the share count is honest.
Common questions
Is Automatic Data Processing (ADP) undervalued?
Against our discounted cash flow estimate of $259.96, ADP at $256.56 is 1% below fair value. That is one model's answer, not a recommendation, and most of a DCF's output sits in a terminal value nobody can forecast.
Which funds own ADP?
21 of the institutions we track reported a position in ADP in their most recent SEC 13F filing. A 13F is filed up to 45 days after quarter end, so it tells you what a fund held then, not what it holds now.
What is ADP's P/E ratio?
ADP trades at 22.6 times earnings. A low P/E is not automatically cheap: on a cyclical company it is usually a warning that earnings are at a peak.
The full research page for ADP, with financial statements, ownership detail, peer comparison and alerts, is free inside the app.
Data from company filings, exchange quotes and SEC EDGAR 13F disclosures. Quotes are delayed. Metrics we do not have are left out rather than estimated. Educational information, not financial advice.