Automatic Data Processing Inc

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ADP : NASDAQ : Technology
$101.64 | %
Today's Range: 0.0 - 0.0
Avg. Daily Volume: 2059500.0
02/23/17 - 4:00 PM ET

Financial Analysis


AUTOMATIC DATA PROCESSING's gross profit margin for the second quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. The company has grown its sales and net income during the past quarter when compared with the same quarter a year ago, and although its growth in net income has outpaced the industry average, its revenue growth has not. AUTOMATIC DATA PROCESSING has very weak liquidity. Currently, the Quick Ratio is 0.14 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 9.29% 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 FY17 Q2 FY16
Net Sales ($mil)2987.32807.0
EBITDA ($mil)658.1570.0
EBIT ($mil)579.7497.4
Net Income ($mil)510.9341.4


Balance Sheet Q2 FY17 Q2 FY16
Cash & Equiv. ($mil)2746.22821.8
Total Assets ($mil)39999.439899.5
Total Debt ($mil)2010.31997.6
Equity ($mil)3815.14206.2


Profitability Q2 FY17 Q2 FY16
Gross Profit Margin43.4442.65
EBITDA Margin22.0220.3
Operating Margin19.4117.72
Sales Turnover0.30.28
Return on Assets4.233.76
Return on Equity44.433.9
Debt Q2 FY17 Q2 FY16
Current Ratio1.091.1
Debt/Capital0.350.32
Interest Expense20.516.9
Interest Coverage28.2829.43


Share Data Q2 FY17 Q2 FY16
Shares outstanding (mil)448.9458.7
Div / share0.570.53
EPS1.130.74
Book value / share8.59.17
Institutional Own % n/a n/a
Avg Daily Volume2066990.01725302.0

Valuation


BUY. AUTOMATIC DATA PROCESSING's P/E ratio indicates a discount compared to an average of 28.19 for the IT Services industry and a value on par with the S&P 500 average of 26.35. For additional comparison, its price-to-book ratio of 11.75 indicates a significant premium versus the S&P 500 average of 2.94 and a significant premium versus the industry average of 9.67. 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 26.78 Peers 28.19   ADP 20.46 Peers 19.60

Average. An average P/E ratio can signify an industry neutral price for a stock and an average growth expectation.

ADP is trading at a valuation on par with 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 24.66 Peers 21.10   ADP 2.12 Peers 3.03

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 significant premium to its peers.

 

Discount. 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 discount to its peers.

 
Price/Book
1 2 3 4 5
premium   discount
  Earnings Growth
1 2 3 4 5
lower   higher
ADP 11.75 Peers 9.67   ADP 22.29 Peers 5.77

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 3.72 Peers 5.36   ADP 7.21 Peers 13.00

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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