Automatic Data Processing Inc (ADP, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $320.69, Automatic Data Processing Inc has witnessed a daily loss of 0.6%, marked against a three-month change of 3.75%. A thorough analysis, underlined by the GF Score, suggests that Automatic Data Processing Inc is well-positioned for substantial growth in the near future.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 6/10
- Profitability rank: 9/10
- Growth rank: 10/10
- GF Value rank: 6/10
- Momentum rank: 10/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With a high GF Score of 95 out of 100, Automatic Data Processing Inc signals the highest outperformance potential.
Understanding Automatic Data Processing Inc Business
Automatic Data Processing Inc is a global technology company providing cloud-based human capital management solutions enabling clients to better implement payroll, talent, time, tax, and benefits administration. Additionally, ADP provides human resource outsourcing solutions that allow customers to offload some of their traditional HR tasks. The company operates through two segments: employer services and the professional employer organization services. Employer services consist of the company's HCM products as well as a la carte HRO solutions. PEO services contain ADP's comprehensive HRO solution where it acts as a co-employer with its customer. As of fiscal 2024, ADP serves over 1.1 million clients and pays over 42 million workers across 140 countries.
Financial Strength Breakdown
According to the Financial Strength rating, Automatic Data Processing Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Automatic Data Processing Inc stands impressively at 9.34, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5.
With a favorable Debt-to-Revenue ratio of 0.22, Automatic Data Processing Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Automatic Data Processing Inc's impressive standing among its peers in generating profit. Automatic Data Processing Inc's Operating Margin has increased (16.71%) over the past five years, as shown by the following data: 2020: 18.49; 2021: 19.90; 2022: 20.89; 2023: 21.48; 2024: 21.58.
Furthermore, Automatic Data Processing Inc's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2020: 39.87; 2021: 40.75; 2022: 41.03; 2023: 42.13; 2024: 42.37. This trend underscores the company's growing proficiency in transforming revenue into profit.
The Piotroski F-Score confirms Automatic Data Processing Inc's solid financial situation based on Joseph Piotroski's nine-point scale, which measures a company's profitability, funding, and operating efficiency. Automatic Data Processing Inc's strong Predictability Rank of 5.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Automatic Data Processing Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 9%, which outperforms better than 52.81% of 2,509 companies in the Software industry.
Moreover, Automatic Data Processing Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 15.3, and the rate over the past five years is 12.1. This trend accentuates the company's continued capability to drive growth.
Conclusion
Automatic Data Processing Inc's financial strength, profitability, and growth metrics, as highlighted by the GF Score, underscore the firm's unparalleled position for potential outperformance. With a strong balance sheet, impressive profitability, and robust growth prospects, Automatic Data Processing Inc is well-positioned to continue its trajectory of success. For investors seeking companies with strong GF Scores, GuruFocus Premium members can explore more opportunities using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
