Automatic Data Processing Inc

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ADP : NASDAQ : Technology
$102.9 -1.5 | -1.4%
Today's Range: 102.84 - 104.84
Avg. Daily Volume: 4543400.0
08/21/17 - 3:59 PM ET

Financial Analysis

AUTOMATIC DATA PROCESSING's gross profit margin for the fourth quarter of its fiscal year 2017 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 0.15 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.

During the same period, stockholders' equity ("net worth") has decreased by 11.25% 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 Q4 FY17 Q4 FY16
Net Sales ($mil)3064.92898.3
EBITDA ($mil)507.9551.5
EBIT ($mil)425.4477.6
Net Income ($mil)265.8282.0

Balance Sheet Q4 FY17 Q4 FY16
Cash & Equiv. ($mil)2783.63214.6
Total Assets ($mil)37180.043670.0
Total Debt ($mil)2010.22010.2
Equity ($mil)3977.04481.6

Profitability Q4 FY17 Q4 FY16
Gross Profit Margin42.4243.94
EBITDA Margin16.5719.02
Operating Margin13.8816.48
Sales Turnover0.330.27
Return on Assets4.663.41
Return on Equity43.5833.32
Debt Q4 FY17 Q4 FY16
Current Ratio1.11.1
Interest Expense22.818.1
Interest Coverage18.6626.39

Share Data Q4 FY17 Q4 FY16
Shares outstanding (mil)445.0455.7
Div / share0.570.53
Book value / share8.949.83
Institutional Own % n/a n/a
Avg Daily Volume4488136.01868538.0


BUY. The current P/E ratio indicates a discount compared to an average of 32.72 for the IT Services industry and a premium compared to the S&P 500 average of 24.23. For additional comparison, its price-to-book ratio of 11.71 indicates a significant premium versus the S&P 500 average of 3.02 and a significant premium versus the industry average of 8.83. 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.

1 2 3 4 5
premium   discount
  Price/Cash Flow
1 2 3 4 5
premium   discount
ADP 27.26 Peers 32.72   ADP 21.91 Peers 20.35

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.

1 2 3 4 5
premium   discount
  Price to
1 2 3 4 5
premium   discount
ADP 24.81 Peers 23.51   ADP NM Peers 1.32

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.


Neutral. 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's negative PEG ratio makes this valuation measure meaningless.

1 2 3 4 5
premium   discount
  Earnings Growth
1 2 3 4 5
lower   higher
ADP 11.71 Peers 8.83   ADP 18.15 Peers 10.57

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 significant 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.

1 2 3 4 5
premium   discount
  Sales Growth
1 2 3 4 5
premium   discount
ADP 3.76 Peers 5.95   ADP 6.10 Peers 13.22

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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