Automatic Data Processing Inc

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ADP : NASDAQ : Technology
$88.95 up 0.76 | 0.86%
Today's Range: 88.10 - 89.07
Avg. Daily Volume: 1,721,200
09/27/16 - 4:00 PM ET

Financial Analysis


AUTOMATIC DATA PROCESSING's gross profit margin for the fourth quarter of its fiscal year 2016 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 0.14 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 6.79% 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 FY16 Q4 FY15
Net Sales ($mil)2898.32694.5
EBITDA ($mil)551.5438.4
EBIT ($mil)477.6367.6
Net Income ($mil)282.0336.2


Balance Sheet Q4 FY16 Q4 FY15
Cash & Equiv. ($mil)3214.61665.9
Total Assets ($mil)43670.033110.5
Total Debt ($mil)2010.211.7
Equity ($mil)4481.64808.5


Profitability Q4 FY16 Q4 FY15
Gross Profit Margin43.9443.18
EBITDA Margin19.0216.27
Operating Margin16.4813.64
Sales Turnover0.270.33
Return on Assets3.414.38
Return on Equity33.3228.62
Debt Q4 FY16 Q4 FY15
Current Ratio1.11.06
Debt/Capital0.310.0
Interest Expense18.11.6
Interest Coverage26.39229.75


Share Data Q4 FY16 Q4 FY15
Shares outstanding (mil)455.7466.4
Div / share0.530.49
EPS0.620.55
Book value / share9.8310.31
Institutional Own % n/a n/a
Avg Daily Volume1760881.01920867.0

Valuation


BUY. AUTOMATIC DATA PROCESSING's P/E ratio indicates a premium compared to an average of 27.47 for the IT Services industry and a premium compared to the S&P 500 average of 25.19. Conducting a second comparison, its price-to-book ratio of 9.10 indicates a significant premium versus the S&P 500 average of 2.82 and a premium versus the industry average of 8.10. The price-to-sales ratio is well above the S&P 500 average, but well below the industry average. After reviewing these and other key valuation criteria, AUTOMATIC DATA PROCESSING proves to trade at a premium 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 27.53 Peers 27.47   ADP 21.92 Peers 20.56

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 21.98 Peers 21.95   ADP 2.42 Peers 2.41

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 9.10 Peers 8.10   ADP 12.06 Peers 21.96

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 3.49 Peers 5.57   ADP 6.66 Peers 22.90

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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