Trade-Ideas LLC identified

Automatic Data Processing

(

ADP

) 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 2.39 mentions/day.
  • ADP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $150.5 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 business process outsourcing services worldwide. The company operates through two segments, Employer Services and Professional Employer Organization (PEO) Services. The stock currently has a dividend yield of 2.2%. ADP has a PE ratio of 31. Currently there are 4 analysts that rate Automatic Data Processing a buy, 1 analyst rates it a sell, and 11 rate it a hold.

TheStreet Recommends

The average volume for Automatic Data Processing has been 2.2 million shares per day over the past 30 days. Automatic Data Processing has a market cap of $41.9 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.85 and a short float of 1.5% with 4.06 days to cover. Shares are up 8.3% year-to-date as of the close of trading on Tuesday.

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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, growth in earnings per share, expanding profit margins, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 26.8%. 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.
  • AUTOMATIC DATA PROCESSING has improved earnings per share by 14.6% 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 $2.91 versus $2.58 in the prior year. This year, the market expects an improvement in earnings ($3.26 versus $2.91).
  • 40.55% is the gross profit margin for AUTOMATIC DATA PROCESSING which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.47% trails the industry average.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's 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 the other strengths this company displays justify these 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 0.12 is very weak and demonstrates a lack of ability to pay short-term obligations.

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