ADP Fair Value Estimate
$273.5034.1% undervalued
Blended fair value estimate based on DCF, Graham Number, and earnings-based models.
Automatic Data Processing Inc
Exchange: NASDAQSector: IndustrialsIndustry: Staffing & Employment Services
Automatic Data Processing, Inc. (ADP) is a provider of business outsourcing solutions. ADP offers a wide range of human resource, payroll, tax and benefits administration solutions from a single source. ADP is also a provider of integrated computing solutions to auto, truck, motorcycle, marine, recreational vehicle, and heavy equipment dealers throughout the world. The Company's operating segments include: Employer Services, professional employer organization (PEO) Services, and Dealer Services. In October 2011, the Company acquired WALLACE - The Training Tax Credit Company. In January 2012, the Company acquired Indian payroll business of Randstad Holding NV. In April 2012, it acquired the human resource solutions subsidiary of SHPS, Inc. In June 2013, Automatic Data Processing, Inc. announced that it has acquired Payroll S.A.
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Trading 34% below its estimated fair value of $273.50.
Current Price
$204.01
+1.36%GoodMoat Value
$273.50
34.1% undervaluedProfile
Valuation (TTM)
Market Cap$82.51B
P/E19.48
EV$86.72B
P/B13.33
Shares Out404.45M
P/Sales3.89
Revenue$21.21B
EV/EBITDA12.91
Automatic Data Processing Inc (ADP) Valuation
GoodMoat Analysis
ADP appears favourably valued with a significant margin of safety relative to its GoodMoat Target. The stock trades at a P/E ratio below its sector average, and its high profitability metrics support a quality premium. The current price suggests a valuation that is not demanding for a business of its calibre.
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Based on the GoodMoat Target of $273.50, the current price of $202.11 implies a margin of safety of approximately 26%. This falls within the 'Favourable' band (20–40%) of the GoodMoat Investment Framework, indicating the stock is priced attractively relative to its estimated intrinsic value. The forward P/E of 19.3x is below the Industrials sector average, which often trades above 20x, and is reasonable for a company with ADP's high profitability, evidenced by a 20% profit margin and a 68.4% ROE. While the 6.2% revenue growth is modest, the valuation is supported by strong cash generation, with a 5.4% Free Cash Flow Yield and a solid dividend. Compared to its own history and sector peers, the P/E multiple does not appear stretched, especially when considering the company's durable business model in payroll and HR services. The valuation assessment suggests the price is not expensive relative to the company's demonstrated quality and financial strength, offering a favourable entry point for a value-oriented investor. Analysis based on data as of 2024-05-15.
ADP Valuation Metrics
FCF$4.40B
FCF Growth Rate12.87%
EPS Growth (CAGR)12.87%
WACC10.00%
Fair Value Models
Graham Number, PEG-based, and Earnings-based models
View Fair Value →ADP Valuation & Fair Value Analysis
Automatic Data Processing Inc (ADP) valuation analysis using multiple fair value methodologies. GoodMoat calculates a blended fair value target using discounted cash flow (DCF) analysis, the Graham Number, and earnings-based valuation models.
The GoodMoat Fair Value target for Automatic Data Processing Inc is $273.50. The current stock price is $204.01, suggesting the stock is 34.1% undervalued.
The price-to-earnings (P/E) ratio is 19.48. Price-to-book ratio is 13.33. Price-to-sales ratio is 3.89. Enterprise value to EBITDA is 12.91. PEG ratio is 1.70.
GoodMoat's valuation models include the Graham Number (based on EPS and book value), an earnings-based model (discounted future EPS), and a PEG-adjusted valuation. The three models are averaged to produce a blended fair value estimate. Use these tools alongside the DCF calculator and reverse DCF to form a comprehensive view of Automatic Data Processing Inc's intrinsic value.