Automatic Data Processing, Inc. (ADP) Buy or Sell Stock Guide

Last updated: Apr 12, '19

Are you looking for the analysis of Automatic Data Processing, Inc. (ADP) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 6 reasons to buy and 7 reasons to sell ADP stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about ADP stock:

  • Is ADP a buy or a sell?
  • Should I sell or hold ADP stock today?
  • Is ADP a good buy / investment?
  • What are ADP analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy ADP stock:

1. ADP is a steady dividend payer that has raised its dividend every year for the last 40 years.

2. ADP's business benefits significantly from increased employment. Every time an employer adds an employee to its payroll, ADP increases its revenue with minimal increased costs.

3. Average client retention is estimated to be longer than 10 years.

4. ADP quarterly revenue growth was 8.30%, higher than the industry and sector average revenue growth (3.61% and 4.74%, respectively). See ADP revenue growth chart.

5. ADP forward dividend yield is 1.98%, higher than the industry (0.38%) and sector (0.45%) forward dividend yields. See ADP forward dividend chart.

6. ADP average analyst rating is Buy. See ADP analyst rating chart.

Now that you understand the bull case, let’s look at the reasons to sell ADP stock (i.e., the bear case):

1. As technology advances, more small business owners may opt for a do-it-yourself SaaS solution.

2. Much of the benefit from the Affordable Care Act has been realized leaving the company without new revenue opportunities.

3. Interest income from client funds could remain depressed if rates don't increase.

4. ADP stock price ($161.67) is close to the 52-week high ($162.07). Perhaps now is a good time to sell? See ADP price chart.

5. ADP profitability is declining. The YoY profit margin change was -1.84pp. See ADP profitability chart.

6. ADP forward P/E ratio is 26.88, and it’s high compared to its industry peers’ P/E ratios. See ADP forward P/E ratio chart.

7. ADP average analyst price target ($159.88) is below its current price ($161.67). See ADP price target chart.

Now let's look at the key statistics for ADP:

Metrics ADP
Price $163.86
Average Price Target / Upside $159.88 / -2.43%
Average Analyst Rating Buy
Industry Business Services
Sector Industrials
Number of Employees 57,000
Market Cap $70.76B
Forward P/E Ratio 26.89
Price/Book Ratio 5.11
PEG 1.79
Revenue (TTM) $13.84B
YoY Quarterly Revenue Growth 8.3%
Profit Margin 11.57%

What are your thoughts on ADP?

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