NEW YORK (TheStreet) -- Shares of Automatic Data Processing (ADP) are declining, down 0.78% to $85.48 in early market trading Friday, after the human capital management solutions company had its rating lowered to "hold" from "buy" by analysts at Stifel Nicolaus this morning.
Stifel Nicolaus analysts said they based their ratings cut on a valuation call, and removed its price target of $83.
The firm also removed Automatic Data Processing from its life of "income opportunity ideas."
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Roseland, NJ-based Automatic Data Processing operates through three business segments including employer services, professional employer organization services, and dealer services.
Separately, TheStreet Ratings team rates AUTOMATIC DATA PROCESSING as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate AUTOMATIC DATA PROCESSING (ADP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 6.6%. Since the same quarter one year prior, revenues slightly increased by 9.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 41.97% is the gross profit margin for AUTOMATIC DATA PROCESSING which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.46% is above that of the industry average.
- Net operating cash flow has significantly increased by 365.19% to $378.20 million when compared to the same quarter last year. In addition, AUTOMATIC DATA PROCESSING has also vastly surpassed the industry average cash flow growth rate of -2.61%.
- The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.25 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the IT Services industry and the overall market on the basis of return on equity, AUTOMATIC DATA PROCESSING has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- You can view the full analysis from the report here: ADP Ratings Report