Automatic Data Processing (ADP) Is Today's Unusual Social Activity Stock
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
(
) as an unusual social activity candidate. In addition to specific proprietary factors, Trade-Ideas identified Automatic Data Processing as such a stock due to the following factors:
- ADP has more that 20x the normal benchmarked social activity for this time of the day compared to its average of 7.90 mentions/day.
- ADP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $158.6 million.
Identifying stocks with 'Unusual Social Activity' tends to be a valuable process for traders looking to capitalize on the 'talk of the town' stocks that are basking in far more attention from the StockTwits financial community than normal. Good press? Bad press? It ultimately doesn't matter if it's good or bad if you know how to trade around the sentiment. Certain hedge funds use such data for their proprietary algorithms and it is not uncommon to see shared social sentiment play itself out in a stock's price trend.
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More details on ADP:
Automatic Data Processing, Inc., together with its subsidiaries, provides technology-based outsourcing solutions to employers worldwide. The company operates through Employer Services and Professional Employer Organization (PEO) Services segments. The stock currently has a dividend yield of 2.2%. ADP has a PE ratio of 28.0. Currently there are 3 analysts that rate Automatic Data Processing a buy, 1 analyst rates it a sell, and 13 rate it a hold.
The average volume for Automatic Data Processing has been 2.1 million shares per day over the past 30 days. Automatic Data Processing has a market cap of $42.8 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.97 and a short float of 1.3% with 3.45 days to cover. Shares are up 6.4% year-to-date as of the close of trading on Tuesday.
Analysis:
rates Automatic Data Processing as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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 6.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- AUTOMATIC DATA PROCESSING has improved earnings per share by 7.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, AUTOMATIC DATA PROCESSING increased its bottom line by earning $2.86 versus $2.79 in the prior year. This year, the market expects an improvement in earnings ($2.93 versus $2.86).
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 30.53% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- ADP's debt-to-equity ratio is very low at 0.00 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 0.10 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the IT Services industry and the overall market on the basis of return on equity, AUTOMATIC DATA PROCESSING has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- You can view the full Automatic Data Processing Ratings Report.
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