Automatic Data Processing Inc

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ADP : NASDAQ : Technology
$95.24 | %
Today's Range: 94.99 - 96.1
Avg. Daily Volume: 1842900.0
12/02/16 - 4:00 PM ET

Financial Analysis


AUTOMATIC DATA PROCESSING's gross profit margin for the first 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 0.17 which clearly shows a lack of ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year.

During the same period, stockholders' equity ("net worth") has decreased by 8.20% 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 Q1 FY17 Q1 FY16
Net Sales ($mil)2916.92714.0
EBITDA ($mil)643.1531.0
EBIT ($mil)565.5462.2
Net Income ($mil)368.7336.6


Balance Sheet Q1 FY17 Q1 FY16
Cash & Equiv. ($mil)2817.63211.9
Total Assets ($mil)34337.434380.3
Total Debt ($mil)2010.21998.0
Equity ($mil)4250.14630.2


Profitability Q1 FY17 Q1 FY16
Gross Profit Margin42.8841.87
EBITDA Margin22.0419.56
Operating Margin19.3917.03
Sales Turnover0.350.32
Return on Assets4.444.34
Return on Equity35.8730.61
Debt Q1 FY17 Q1 FY16
Current Ratio1.131.14
Debt/Capital0.320.3
Interest Expense19.94.9
Interest Coverage28.4294.33


Share Data Q1 FY17 Q1 FY16
Shares outstanding (mil)453.1463.4
Div / share0.530.49
EPS0.810.72
Book value / share9.389.99
Institutional Own % n/a n/a
Avg Daily Volume1791505.01823019.0

Valuation


BUY. AUTOMATIC DATA PROCESSING's P/E ratio indicates a premium compared to an average of 27.15 for the IT Services industry and a premium compared to the S&P 500 average of 25.37. For additional comparison, its price-to-book ratio of 10.30 indicates a significant premium versus the S&P 500 average of 2.81 and a significant premium versus the industry average of 7.97. 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 28.94 Peers 27.15   ADP 20.97 Peers 19.71

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 23.75 Peers 21.01   ADP 2.54 Peers 1.60

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.

 

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 10.30 Peers 7.97   ADP 11.33 Peers 12.58

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.

 

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

ADP is expected to keep pace with its peers on the basis of earnings growth.

 
Price/Sales
1 2 3 4 5
premium   discount
  Sales Growth
1 2 3 4 5
premium   discount
ADP 3.69 Peers 5.16   ADP 7.07 Peers 16.42

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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