Automatic Data Processing Inc (ADP, Financial), a leading player in the Business Services industry, is currently trading at $254.3 with a market capitalization of $105.06 billion. The stock has seen a gain of 5.75% today and a significant increase of 17.70% over the past four weeks. In this article, we will delve into the company's GF Score of 94/100, which indicates a high outperformance potential. The GF Score is a comprehensive stock performance ranking system developed by GuruFocus, which evaluates a company's financial strength, profitability, growth, value, and momentum.
Financial Strength Analysis
ADP's Financial Strength Rank stands at 6/10. This metric evaluates the company's financial stability and sustainability. ADP's high interest coverage of 20.77 indicates a low debt burden, while its debt to revenue ratio of 0.20 suggests a healthy balance between debt and income. However, its Altman Z-Score of 2.10 is slightly below the safe zone, indicating some financial risk.
Profitability Rank Analysis
The company's Profitability Rank is an impressive 9/10, reflecting its strong profitability. ADP's operating margin of 21.20% and a Piotroski F-Score of 6 demonstrate robust operational efficiency and financial health. The company's consistent profitability over the past decade and a positive trend in the operating margin further underscore its strong performance.
Growth Rank Analysis
ADP's Growth Rank is a perfect 10/10, indicating exceptional growth in terms of revenue and profitability. The company's 5-year revenue growth rate of 6.90% and 3-year revenue growth rate of 7.20% reflect a consistent upward trajectory. Furthermore, its 5-year EBITDA growth rate of 10.40% suggests a strong expansion in its business operations.
GF Value Rank Analysis
The GF Value Rank of ADP is 6/10, suggesting that the stock is fairly valued. This rank is determined by the price-to-GF-Value ratio, a proprietary metric calculated based on historical multiples and an adjustment factor based on a company's past returns and growth.
Momentum Rank Analysis
ADP's Momentum Rank is 7/10, indicating a positive momentum in its stock performance. This rank is determined using the standardized momentum ratio and other momentum indicators, reflecting the stock's recent performance relative to its past.
Competitor Analysis
When compared to its main competitors, ADP holds a strong position. Paychex Inc (PAYX, Financial) and Robert Half Inc (RHI, Financial) have slightly higher GF Scores of 96 and 97, respectively. However, Kanzhun Ltd (BZ, Financial) lags behind with a GF Score of 22.
Conclusion
In conclusion, ADP's overall GF Score of 94/100 suggests a high potential for outperformance. Its strong financial strength, impressive profitability, exceptional growth, fair valuation, and positive momentum make it a compelling choice for potential investors. However, investors should also consider the competitive landscape and market conditions before making investment decisions.
