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New Lifetime High Reached: Automatic Data Processing (ADP)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Automatic Data Processing ( ADP) as a new lifetime high candidate. In addition to specific proprietary factors, Trade-Ideas identified Automatic Data Processing as such a stock due to the following factors:

  • ADP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $111.6 million.
  • ADP has traded 839,996 shares today.
  • ADP is trading at a new lifetime high.

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More details on ADP:

Automatic Data Processing, Inc., together with its subsidiaries, provides technology-based outsourcing solutions to employers and vehicle retailers and manufacturers worldwide. The stock currently has a dividend yield of 2.4%. ADP has a PE ratio of 26.1. Currently there are 6 analysts that rate Automatic Data Processing a buy, 2 analysts rate it a sell, and 14 rate it a hold.

The average volume for Automatic Data Processing has been 1.7 million shares per day over the past 30 days. Automatic Data Processing has a market cap of $35.2 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.86 and a short float of 0.7% with 2.27 days to cover. Shares are up 28.1% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Automatic Data Processing as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 19.9%. Since the same quarter one year prior, revenues slightly increased by 7.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $575.50 million or 15.30% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -17.64%.
  • ADP's debt-to-equity ratio is very low at 0.04 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 0.13 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Compared to its closing price of one year ago, ADP's share price has jumped by 30.33%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • AUTOMATIC DATA PROCESSING's earnings per share declined by 9.6% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, AUTOMATIC DATA PROCESSING's EPS of $2.80 remained unchanged from the prior years' EPS of $2.80. This year, the market expects an improvement in earnings ($3.15 versus $2.80).

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