Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
NEW YORK (
) has been reiterated by TheStreet Ratings as a buy with a ratings score of A . The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, growth in earnings per share, increase in net income and reasonable valuation levels. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 5.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
- AUTOMATIC DATA PROCESSING has improved earnings per share by 10.4% 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 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 ($2.93 versus $2.82).
- 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 6.9% when compared to the same quarter one year prior, going from $241.80 million to $258.40 million.
Automatic Data Processing, Inc. provides business outsourcing solutions. The company operates in three segments: Employer Services, Professional Employer Organization (PEO) Services, and Dealer Services. The company has a P/E ratio of 20.6, above the average computer software & services industry P/E ratio of 20.3 and above the S&P 500 P/E ratio of 17.7. Automatic Data Processing has a market cap of $27.95 billion and is part of the
industry. Shares are up 8.2% year to date as of the close of trading on Friday.
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--Written by a member of TheStreet Ratings Staff.