Automatic Data Processing Inc

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ADP : NASDAQ : Technology
$101.87 up 0.46 | 0.45%
Today's Range: 101.44 - 102.275
Avg. Daily Volume: 2273500.0
06/27/17 - 9:31 AM ET

Financial Analysis


AUTOMATIC DATA PROCESSING's gross profit margin for the third quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. The company managed to grow both sales and net income at a faster pace than the average competitor in its industry this quarter as compared to the same quarter a year ago. AUTOMATIC DATA PROCESSING has very weak liquidity. Currently, the Quick Ratio is 0.13 which clearly shows a lack of ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow.

During the same period, stockholders' equity ("net worth") has decreased by 8.88% from the same quarter last year. The key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the near future.

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Income Statement Q3 FY17 Q3 FY16
Net Sales ($mil)3410.73248.5
EBITDA ($mil)912.9874.8
EBIT ($mil)835.3801.5
Net Income ($mil)588.0532.5


Balance Sheet Q3 FY17 Q3 FY16
Cash & Equiv. ($mil)2998.72965.1
Total Assets ($mil)43855.951125.6
Total Debt ($mil)2010.32010.2
Equity ($mil)4103.14503.2


Profitability Q3 FY17 Q3 FY16
Gross Profit Margin46.2546.46
EBITDA Margin26.7626.92
Operating Margin24.4924.67
Sales Turnover0.280.22
Return on Assets3.983.02
Return on Equity42.6432.6
Debt Q3 FY17 Q3 FY16
Current Ratio1.091.08
Debt/Capital0.330.31
Interest Expense16.816.3
Interest Coverage49.7249.17


Share Data Q3 FY17 Q3 FY16
Shares outstanding (mil)447.9456.1
Div / share0.570.53
EPS1.311.17
Book value / share9.169.87
Institutional Own % n/a n/a
Avg Daily Volume2250576.01854916.0

Valuation


BUY. AUTOMATIC DATA PROCESSING's P/E ratio indicates a discount compared to an average of 31.75 for the IT Services industry and a value on par with the S&P 500 average of 25.75. Conducting a second comparison, its price-to-book ratio of 11.12 indicates a significant premium versus the S&P 500 average of 3.09 and a premium versus the industry average of 9.85. The price-to-sales ratio is well above the S&P 500 average, but well below the industry average. The valuation analysis reveals that, AUTOMATIC DATA PROCESSING seems to be trading at a discount to investment alternatives within the industry.


Price/Earnings
1 2 3 4 5
premium   discount
  Price/Cash Flow
1 2 3 4 5
premium   discount
ADP 26.33 Peers 31.75   ADP 19.70 Peers 21.57

Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations.

ADP is trading at a discount to its peers.

 

Average. The P/CF ratio, a stock’s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures.

ADP is trading at a valuation on par to its peers.

 
Price/Projected
Earnings
1 2 3 4 5
premium   discount
  Price to
Earnings/Growth
1 2 3 4 5
premium   discount
ADP 25.73 Peers 22.07   ADP 1.86 Peers 1.73

Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations.

ADP is trading at a premium to its peers.

 

Average. The PEG ratio is the stock’s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples.

ADP trades at a valuation on par to its peers.

 
Price/Book
1 2 3 4 5
premium   discount
  Earnings Growth
1 2 3 4 5
lower   higher
ADP 11.12 Peers 9.85   ADP 21.69 Peers -1.13

Premium. A higher price-to-book ratio makes a stock less attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet.

ADP is trading at a premium to its peers.

 

Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios.

ADP is expected to have an earnings growth rate that significantly exceeds its peers.

 
Price/Sales
1 2 3 4 5
premium   discount
  Sales Growth
1 2 3 4 5
premium   discount
ADP 3.74 Peers 5.67   ADP 6.53 Peers 11.40

Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales.

ADP is trading at a significant discount to its industry on this measurement.

 

Lower. A sales growth rate that trails the industry implies that a company is losing market share.

ADP significantly trails its peers on the basis of sales growth

 

 

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