Automatic Data Processing Inc.

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ADP : NASDAQ : Technology Services
$116.1 up 0.69 | 0.6%
Today's Range: 115.44 - 118.19
Avg. Daily Volume: 1959600.0
02/21/18 - 4:00 PM ET

Financial Analysis


AUTOMATIC DATA PROCESSING's gross profit margin for the second quarter of its fiscal year 2018 is essentially unchanged when compared to the same period a year ago. Even though sales increased, the net income has decreased. AUTOMATIC DATA PROCESSING has very weak liquidity. Currently, the Quick Ratio is 0.10 which clearly shows a lack of ability to cover short-term cash needs. The company's liquidity decreased from the same period a year ago, despite already having very weak liquidity to begin with. This would indicate deteriorating cash flow.

At the same time, stockholders' equity ("net worth") has remained virtually unchanged only increasing by 3.04% 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 Q2 FY18 Q2 FY17
Net Sales ($mil)3235.42987.3
EBITDA ($mil)692.5658.1
EBIT ($mil)597.7579.7
Net Income ($mil)467.5510.9


Balance Sheet Q2 FY18 Q2 FY17
Cash & Equiv. ($mil)1776.62746.2
Total Assets ($mil)44545.539999.4
Total Debt ($mil)2004.92010.3
Equity ($mil)3931.23815.1


Profitability Q2 FY18 Q2 FY17
Gross Profit Margin42.7643.44
EBITDA Margin21.422.02
Operating Margin18.4719.41
Sales Turnover0.290.3
Return on Assets3.864.23
Return on Equity43.8244.4
Debt Q2 FY18 Q2 FY17
Current Ratio1.061.09
Debt/Capital0.340.35
Interest Expense27.520.5
Interest Coverage21.7328.28


Share Data Q2 FY18 Q2 FY17
Shares outstanding (mil)442.7448.9
Div / share0.630.57
EPS1.051.13
Book value / share8.888.5
Institutional Own % n/a n/a
Avg Daily Volume2013148.02654404.0

Valuation


BUY. This stock's P/E ratio indicates a significant discount compared to an average of 68.05 for the IT Services industry and a premium compared to the S&P 500 average of 25.51. For additional comparison, its price-to-book ratio of 13.01 indicates a significant premium versus the S&P 500 average of 3.26 and a significant premium versus the industry average of 11.34. 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 30.00 Peers 68.05   ADP 26.08 Peers 24.45

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

ADP is trading at a significant 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 24.09 Peers 24.89   ADP 3.73 Peers 1.81

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.

 

Premium. 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 significant premium to its peers.

 
Price/Book
1 2 3 4 5
premium   discount
  Earnings Growth
1 2 3 4 5
lower   higher
ADP 13.01 Peers 11.34   ADP 3.21 Peers 21.78

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.

 

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

However, ADP is expected to significantly trail its peers on the basis of its earnings growth rate.

 
Price/Sales
1 2 3 4 5
premium   discount
  Sales Growth
1 2 3 4 5
premium   discount
ADP 4.00 Peers 6.97   ADP 6.13 Peers 15.77

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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