One-glance verdict
Undervalued
$390.08 our estimate vs market $305.20
Wall Street consensus: $286.40 (-26.6% lower than our fair-value estimate)
22% below our estimate, below the bear case
Fundamentals snapshot
Automatic Data Processing, Inc.
ADP · NMS · Technology · Software - Application
Current price
$305.20
52-week range
$188.16 - $305.97
Market cap
$120.94B
Balance sheet
Healthy
12.58x Strong cushion
Net debt $1.28B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
2 Risks
3 rewards · 2 risks
- Reward Revenue grew 6.7% last year.
- Reward Returns 72.2% on equity, ahead of 83% of its peers.
- Risk Insider ownership is only 0.1% (peer median: 10.2%).
- Risk Operating margin compressed from 25.0% to 23.5% over 3 years.
What this company does
Automatic Data Processing, Inc.
Automatic Data Processing, Inc. (ADP) helps businesses manage their employees, from paying them to handling benefits and other HR tasks, primarily through cloud-based software. Most of their money comes from charging businesses ongoing fees for these services, which is like getting paid regularly for a subscription, providing a predictable stream of income. This matters because it means ADP has a stable business model that can continue to grow as more companies rely on them for essential employee management.
How the company got here
Automatic Data Processing, Inc., or ADP, started way back in 1949 as a small payroll service company. Its founders saw a big need for businesses to accurately handle paying their employees. Over the decades, ADP grew by expanding its services beyond just payroll to include a wider range of human resources tools. A key turning point was embracing technology, especially moving to cloud-based solutions, which allowed them to serve more businesses efficiently and offer more sophisticated HR management tools.
What it actually does
Think of ADP as a company that helps other businesses manage their employees, especially when it comes to paying them and handling all the related paperwork. They provide software and services that take care of tasks like calculating paychecks, managing benefits, and ensuring compliance with labor laws. Essentially, ADP allows businesses, big or small, to outsource the complex and time-consuming job of HR administration, freeing them up to focus on their core operations.
Employer Services
This is ADP's largest business, focusing on providing essential HR tools and services to businesses of all sizes. They offer cloud-based software like RUN Powered by ADP for small businesses, which simplifies payroll, HR, and making sure they follow the rules. For mid-sized and larger companies, they have more comprehensive solutions like ADP Workforce Now, which helps manage everything from hiring to employee data. This segment is the engine of ADP's revenue, handling the day-to-day HR needs for a vast number of clients.
Professional Employer Organization (PEO) Services
In this part of the business, ADP partners with companies through a 'co-employment' model, meaning ADP becomes a co-employer for tax and insurance purposes. This allows smaller and mid-sized businesses to offer robust benefits packages, like health insurance and retirement plans, that they might not be able to afford on their own. ADP TotalSource is their main offering here, providing not just benefits but also guidance on HR, safety, and managing risks like workers' compensation. This segment is a significant and growing part of ADP's overall business.
What management is betting on now
ADP's current strategy revolves around deepening its expertise in human capital management (HCM), which is the overall management of an organization's workforce. They are investing heavily in their cloud technology to make their platforms even more intuitive and powerful for clients. The goal is to offer a seamless experience for businesses, helping them attract, retain, and develop their employees more effectively. By providing advanced analytics and tools, ADP aims to be an indispensable partner in how companies manage their most valuable asset: their people.
Price history
How the share price has moved
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Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
Revenue
$5.47B
Net income
$978.70M
Diluted EPS
2.45
Operating cash flow
$1.43B
Free cash flow
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Sources
Revenue
$5.94B
Net income
$1.36B
Diluted EPS
3.38
Operating cash flow
$2.24B
Free cash flow
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Sources
Revenue
$5.36B
Net income
$1.06B
Diluted EPS
2.62
Operating cash flow
$1.13B
Free cash flow
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Revenue
$5.18B
Net income
$1.01B
Diluted EPS
2.49
Operating cash flow
$642.30M
Free cash flow
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Revenue
$5.13B
Net income
$910.70M
Diluted EPS
2.23
Operating cash flow
$1.44B
Free cash flow
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Revenue
$5.55B
Net income
$1.25B
Diluted EPS
3.06
Operating cash flow
$1.53B
Free cash flow
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Revenue
$5.05B
Net income
$963.20M
Diluted EPS
2.35
Operating cash flow
$1.15B
Free cash flow
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Revenue
$4.83B
Net income
$956.30M
Diluted EPS
2.34
Operating cash flow
$824.40M
Free cash flow
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Is it cheap or expensive?
Fair value $390.08 vs current price $305.20
Wall Street consensus is the average analyst price target: $286.40 (-26.6% lower than our fair-value estimate).
Our most-likely fair value is $390.08 a share — about 27.8% above today's price of $305.20, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Healthy
Net debt $1.3B. Interest coverage 12.6x.
Net debt
$1.28B
Interest coverage
12.58x
Automatic Data Processing, Inc.'s profit covers its interest bill about 12.6 times over. which is stronger than most peers shown here.
Healthy
Worse cushion
Baseline
Better cushion
ADP
BASELINE
Automatic Data Processing, Inc.
Total debt $5.51B Interest coverage 12.58x This is the baseline the peer rows are being compared against.
Total debt $4.62B Interest coverage 9.32x -26% vs ADP Carries about 1.4x less debt cushion than ADP.
Total debt $3.77B Interest coverage 8.98x -29% vs ADP Carries about 1.4x less debt cushion than ADP.
Total debt $982.80M Interest coverage 166.82x +1,226% vs ADP Carries about 13.3x more debt cushion than ADP.
Total debt $169.14B Interest coverage 4.88x -61% vs ADP Carries about 2.6x less debt cushion than ADP.
Total debt $8.42B Interest coverage 24.13x +92% vs ADP Carries about 1.9x more debt cushion than ADP.
What you should know
The case for and against ADP
3 Rewards
2 Risks
Rewards
-
Revenue grew 6.7% last year.
-
Returns 72.2% on equity, ahead of 83% of its peers.
-
Free cash flow was positive in 4/10 years.
Risks
-
Insider ownership is only 0.1% (peer median: 10.2%).
-
Operating margin compressed from 25.0% to 23.5% over 3 years.
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
27.90x
Forward P/E
22.77x
P/B
20.13x
P/S
5.51x
EV/EBITDA
18.45x
PEG ratio
2.45x
Profitability
How much profit each dollar creates
Gross margin
48.7%
Operating margin
23.5%
Net margin
20.1%
ROE
72.2%
ROA
6.2%
Health
Liquidity and balance-sheet strength
Debt / equity
0.91x
Current ratio
1.05x
Quick ratio
0.15x
Total debt
$5.51B
Total cash
$4.23B
Growth
How the business has been compounding
Revenue TTM
$21.95B
Revenue 5Y CAGR
7.4%
EPS TTM
10.94
EPS 5Y CAGR
12.5%
Cash flow
How much cash the business throws off
Operating CF TTM
$5.44B
Free CF TTM
$4.78B
FCF margin
21.8%
Dividend
Shareholder payout
Yield
2.3%
Payout ratio
60.7%
Last ex-div date
2026-09-11