Automatic Data Processing Inc
🇺🇸 ADP · NYSE/NASDAQ · US0530151036
Technology
USD 192.41 price at analysis
Scores
Key Metrics
Powered by EODHDP/E (TTM)
18.5
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: 192.41 ÷ 10.41 = 18.5
TTM period through: 2025-12-31
Forward P/E (estimated): 26.5
Based on analyst estimates
Reference: Provider P/E (Trailing): 18.1
Yield (Fwd)
3.53%
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): 3.22%
Net Debt/EBITDA (TTM)
0.3x
Latest quarter: 1.4x
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: 2025-12-31
Latest quarter (2025-12-31): 1.4x
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)
65.3%
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): 59.3%
Cash Flow Payout (TTM): 53.0%
FCF Coverage (TTM): 1.83x
ROE
73.8%
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
18.7x
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 processor with exceptional dividend safety and a pristine balance sheet. While the company offers outstanding long-term fundamentals and a reliable 3.2% yield, current valuation multiples offer limited upside. Existing shareholders should maintain positions given the strong dividend coverage, but new investors may want to wait for a broader market pullback to provide a more attractive entry point.
Sector Context
Automatic Data Processing provides comprehensive payroll, human resources, and tax administration services to businesses globally. While strictly classified in the Technology sector, its services function as essential, recurring business infrastructure (akin to business staples) with exceptionally high switching costs, making its cash flows much more reliable than typical technology hardware or software peers.
📊 Strategy Analysis
- • Exceptional balance sheet with Net Debt/EBITDA of just 0.34x and an outstanding ROE of 73.84%, demonstrating highly efficient capital allocation.
- • Highly sustainable dividend with a 3.22% yield, supported by an ideal 62.13% TTM payout ratio and robust free cash flow coverage (1.83x).
- • Extremely sticky business model with high client switching costs, providing highly predictable, recurring cash flows.
- • Perfect 10-year dividend consistency with a strong 12.4% CAGR and zero cuts, signaling shareholder-friendly management.
⚠ What to Watch
- • The TTM P/E of 18.49 sits above the strategy's optimal 8-15x range, reflecting a premium valuation.
- • Current trading price of $192.41 exceeds even the upper bound of the monopoly fair value estimate ($187.32), limiting near-term upside for new positions.
- • While business fundamentals are resilient, cyclical macroeconomic pressures that cause widespread corporate headcount reductions could negatively impact payroll processing volumes.
📊 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: 2026-04-11
Disclaimer: This information is for educational purposes only. Not financial advice.