AUTOMATIC DATA PROCESSING's gross profit margin for the first quarter of its fiscal year 2016 is essentially unchanged when compared to the same period a year ago. Sales and net income have grown, and although the growth in revenues has outpaced the average competitor within the industry, the net income growth has not. AUTOMATIC DATA PROCESSING has very weak liquidity. Currently, the Quick Ratio is 0.18 which clearly shows a lack of ability to cover short-term cash needs. The company's liquidity decreased from the same period a year ago, despite already having very weak liquidity to begin with. This would indicate deteriorating cash flow.
During the same period, stockholders' equity ("net worth") has decreased by 20.54% from the same quarter last year. The key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the near future.
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|Income Statement||Q1 FY16||Q1 FY15|
|Net Sales ($mil)||2714.0||2566.1|
|Net Income ($mil)||336.6||295.2|
|Balance Sheet||Q1 FY16||Q1 FY15|
|Cash & Equiv. ($mil)||3211.9||4437.3|
|Total Assets ($mil)||34380.3||30208.1|
|Total Debt ($mil)||1995.2||1947.9|
|Profitability||Q1 FY16||Q1 FY15|
|Gross Profit Margin||41.2||41.28|
|Return on Assets||4.34||4.9|
|Return on Equity||30.61||21.86|
|Debt||Q1 FY16||Q1 FY15|
|Share Data||Q1 FY16||Q1 FY15|
|Shares outstanding (mil)||463.4||481.8|
|Div / share||0.49||0.48|
|Book value / share||9.99||12.09|
|Institutional Own %||n/a||n/a|
|Avg Daily Volume||2063555.0||1887179.0|
BUY. The current P/E ratio indicates a discount compared to an average of 31.97 for the IT Services industry and a premium compared to the S&P 500 average of 21.93. Conducting a second comparison, its price-to-book ratio of 8.65 indicates a significant premium versus the S&P 500 average of 2.77 and a premium versus the industry average of 8.19. The price-to-sales ratio is well above the S&P 500 average, but well below the industry average. The valuation analysis reveals that, AUTOMATIC DATA PROCESSING seems to be trading at a discount to investment alternatives within the industry.
|ADP 28.70||Peers 31.97||ADP 24.67||Peers 19.85|
Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations.
ADP is trading at a discount to its peers.
Premium. The P/CF ratio, a stock’s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures.
ADP is trading at a premium to its peers.
|ADP 23.22||Peers 22.09||ADP 2.31||Peers 2.66|
Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations.
ADP is trading at a premium to its peers.
Discount. The PEG ratio is the stock’s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples.
ADP trades at a discount to its peers.
|ADP 8.65||Peers 8.19||ADP 13.58||Peers 10.63|
Average. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet.
ADP is trading at a valuation on par with its peers.
Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios.
ADP is expected to have an earnings growth rate that significantly exceeds its peers.
|ADP 3.61||Peers 5.96||ADP 6.28||Peers 5.64|
Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales.
ADP is trading at a significant discount to its industry on this measurement.
Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share.
ADP has a sales growth rate that exceeds its peers.
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