Automatic Data Processing Inc
🇺🇸 ADP · NYSE/NASDAQ · US0530151036
Technology
USD 225.31 price at analysis
Scores
Key Metrics
Powered by EODHDP/E (TTM)
21.0
P/E (Price-to-Earnings)Shows how much investors pay for each $1 of profit. We display the TTM P/E (Trailing Twelve Months) which uses actual earnings from the last 4 quarters. This is more reliable than Forward P/E which uses analyst estimates.
Calculation: 225.31 ÷ 10.73 = 21.0
TTM period through: 2026-03-31
Forward P/E (estimated): 18.2
Based on analyst estimates
Reference: Provider P/E (Trailing): 20.5
Yield (Fwd)
3.02%
Dividend YieldThe Forward yield (Fwd) shows the next announced annual dividend / current price — what you'd earn going forward. The Trailing yield (TTM) in the tooltip shows dividends actually paid in the last 12 months. Forward is shown as primary because it reflects the company's current commitment to shareholders.
Trailing Yield (TTM): 2.94%
Div. Growth (5Y CAGR)
11.5%
Growth Streak
9 yrs
Consecutive years of increase
Net Debt/EBITDA (TTM)
0.1x
Latest quarter: 0.4x
Net Debt / EBITDAA leverage ratio showing how many years of EBITDA (earnings before interest, taxes, depreciation, and amortization) it would take to repay net debt. EBITDA approximates operating cash generation. Lower ratios (e.g., <3x) are generally safer; higher (e.g., >5x) may indicate more financial risk.
TTM through: 2026-03-31
Latest quarter (2026-03-31): 0.4x
The quarterly value can spike when quarterly EBITDA is very low (e.g., one-time charges).
Quick guide: <2x manageable, >4x can be risky (sector-dependent).
Payout (Fwd)
63.4%
Payout RatioDividends as a percentage of earnings. The Forward payout (Fwd) uses the announced dividend divided by actual past earnings (TTM) — it tells you if the company can afford what it promised. Very high payouts can be risky, especially if profits fall.
Announced dividend / actual earnings (TTM)
Payout (TTM): 59.1%
Cash Flow Payout (TTM): 47.1%
FCF Coverage (TTM): 2.01x
ROE
71.2%
ROE (Return on Equity)A profitability measure: how much profit is generated from shareholders’ equity. Higher isn’t always better if it comes from high debt.
EV/EBITDA
13.3x
EV/EBITDAA valuation ratio that compares total business value (including debt) to EBITDA. Lower can mean cheaper, but context matters.
Summary
Automatic Data Processing is a high-quality, wide-moat payroll processing leader offering exceptional dividend safety and a pristine balance sheet. While the business boasts outstanding long-term fundamentals and highly sticky recurring revenues, the current valuation at a P/E of 21 offers limited upside. Existing shareholders should maintain positions given the very well-covered dividend, but new investors may want to wait for a more attractive entry point.
Sector Context
Automatic Data Processing provides human capital management (HCM) and payroll software and services globally. While classified as Technology, its business functions more like an essential business service with extremely sticky recurring revenue, high switching costs, and resilient cash flows, differentiating it from consumer or hardware tech facing rapid obsolescence.
📊 Strategy Analysis
- • Pristine balance sheet with a Net Debt/EBITDA of 0.11x and Debt/Equity of 0.63, providing exceptional financial stability.
- • Strong dividend sustainability with a 61.8% TTM payout ratio and an even lower cash flow payout ratio of 47.1%.
- • Demonstrated 10-year track record of consistent revenue growth, earnings growth, and uninterrupted dividend hikes.
⚠ What to Watch
- • The TTM P/E of 21.00 sits above the strategy's optimal 8-15x range, reflecting a premium valuation that limits the margin of safety.
- • Current trading price of $225.31 exceeds the calculated monopoly fair value bound of $193.10.
- • Classified in the Technology sector, which the strategy generally cautions against, although ADP's sticky HR services mitigate traditional obsolescence risks.
📊 Historical Trends (10 Years)
Powered by EODHDThese charts show how key metrics have evolved over the past decade, helping you identify if the company is improving or deteriorating.
Debt Evolution (Net Debt / EBITDA)
Lower values are better. A declining trend indicates the company is reducing its debt (deleveraging).
Revenue & Earnings Growth
Consistent growth in revenueRevenue
The money a company brings in from selling its products or services. It’s the top line before costs. (blue) and earningsEarnings (Profit)
What’s left after expenses. Positive earnings mean the business made a profit; negative means a loss. (green) indicates a healthy business. Look for upward trends and recoveries after temporary dips.
Dividend Sustainability (FCF vs Dividends Paid)
Free cash flowFree Cash Flow
Cash left after the company pays for running the business and maintaining it. Often used to fund dividends, pay debt, or buy back shares. (FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., blue) should cover dividends paidDividends Paid
Cash the company paid out to shareholders. It’s not guaranteed and can change over time. (green). If dividends consistently exceed FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., the dividend may be at risk.
Analysis date: 2026-05-23
Disclaimer: This information is for educational purposes only. Not financial advice.