The market for human capital management (HCM) is growing at an impressive pace. Looking ahead, it is estimated that this market will clock an annual growth rate of 8.2% for the next four years, and become as big as $15.4 billion by 2018. Now, to tap this opportunity, Automatic Data Processing (ADP, Financial) has adopted a number of strategies, including cloud migration and focus on mobile adoption.
Focusing on growth
Automatic Data primarily focuses on providing technology-focused outsourcing solutions. As a result, the company is now looking to attract more clients by providing an entire range of HCM services that range from recruitment to retirement. In my opinion, the company's focus on end-user experience and value-added services will help it deliver an improved technology experience to customers, and this will help it grow its business.
As such, it is not surprising that Automatic has opened an innovation lab in Chelsea, New York City. At this lab, the company is focusing on faster product development, and the result is the deployment of a cutting-edge user experience.
Automatic has upgraded the experience that it delivers to customers. The fresh user experience is aimed at providing a reactive platform, which will enable employees to incorporate key HR processes into their daily work schedules. Automatic intends to release this innovative user experience to 22 million payroll solutions users in North America by the end of 2014, and integrate it with other solutions in its portfolio in 2015.
Improving the offerings
In addition to the client-focused offerings, the company has also released the ADP Marketplace, allowing clients, associated companies, and intermediary developers permission to leverage its interfaces for application programming. Now, with this move, the company will be able to attract more developers to its platform, while also providing more customization freedom to clients.
In addition, the company has also enhanced its portfolio of Affordable Care Act or ACA fulfilment tools. The ADP Health Compliance is an end-to-end solution available in the market, and helps manage the entire labor-exhaustive regulatory terms among employees, employers, public exchanges, and government agencies.
Automatic is also successfully utilizing its worldwide presence to enable its clients with HCM solutions at the place of work. Moreover, the company is witnessing continued client migration to its innovative cloud-based solutions. For instance, by the end of the previous quarter, over 460,000 businesses were enabled by its cloud services.
There’s deepened engagement of ADP with its end-users and clients enabled by the mobile win. At present, ADP has greater than 3 million users on its mobile app, an expansion of above 18% during the previous quarter.
Same-store pays per control in the U.S. increased by 3.1%. In Europe, same-store pays per control is becoming constant and declined 0.2 percentage points during the first quarter.
The average client fund balances achieved 7% growth enabled by its total fresh business growth, particularly in the minor and large market.
Regarding the outlook for 2015, Automatic expects total growth of revenue in 7% to 8% range over fiscal year 2014 to revenue of nearly $10.3 billion.
Diluted earnings per share are believed to grow in 12% to 14% range as compared to $2.58 during fiscal year 2014.
Conclusion
Hence, Automatic is making good progress. Given its moves, investors should think of buying this stock for the long run.
