Automatic Data Processing Stock Buy Recommendation Reiterated (ADP)
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- The revenue growth came in higher than the industry average of 10.7%. Since the same quarter one year prior, revenues slightly increased by 5.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the IT Services industry average. The net income increased by 0.8% when compared to the same quarter one year prior, going from $302.70 million to $305.30 million.
- AUTOMATIC DATA PROCESSING's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, AUTOMATIC DATA PROCESSING increased its bottom line by earning $2.82 versus $2.51 in the prior year. This year, the market expects an improvement in earnings ($2.91 versus $2.82).
- After a year of stock price fluctuations, the net result is that ADP's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- ADP's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.12 is very weak and demonstrates a lack of ability to pay short-term obligations.
--Written by a member of TheStreet Ratings Staff. FREE for a limited time only: Get TheStreet Ratings #1 Stock Report NOW!
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