ADP

Automatic Data Processing

Fundamental data last updated:April 13, 2026

company profile

SECTOR

Technology

industry

Software - Application

Exchange

Nasdaq

County of HQ

United States

Next Earnings Date

04/29/26

Business Summary

ADP operates a recurring-revenue software platform model, generating cash by embedding payroll, HR, and workforce management solutions deeply into client operations. The business produces strong operating leverage, as evidenced by its 66.30% operating margin, meaning incremental revenue converts efficiently into profit. High ROIC of 43.70% suggests the company reinvests capital at exceptional rates, reinforcing a compounding flywheel. Its moat stems from workflow integration, compliance complexity, and switching friction—once embedded, clients are reluctant to migrate mission-critical payroll and HR infrastructure.

VALUATION

P/E

18.2

Market Cap ($M USD)

$76,015

Forward P/E

15.8

PEG

1.7

PRICE TO SALES

3.6

PRICE TO BOOK

11.9

EV / EBITDA

11.9

5-Year Average P/E

DIVIDEND

Yield

3.40%

Annual Payout

$6.80

Payout Ratio

60.50%

Consecutive Years of Dividend Growth

10+

5-Year Dividend Growth Rate

12.80%

Financial Health & Profitability

Earnings Per Share

$10.44

Next Year EPS Growth Estimate

$11.97

Next Year Revenue Growth Estimate

5.70%

Return on Equity (ROE)

66.30%

Operating Margin

26.30%

Debt-to-Equity

0.7

Piotroski F-Score

8

Altman Z-Score

1.5

Return on Invested Capital (ROIC)

43.70%%

Current Ratio

1

Quick Ratio

Gainseekers Quantitative Analysis

Summary

At 18.2x earnings and 15.8x forward earnings, the market is pricing ADP as a moderate-growth compounder rather than a premium defensive franchise, yet the 1.5 Altman Z-Score signals balance sheet stress that contradicts its perceived stability. A PEG of 1.7 implies growth is not cheap relative to price, particularly when EPS next year is estimated at $10.44 versus current EPS of 11.9, suggesting near-term earnings compression. The valuation is not distressed, but it is hardly a bargain given the weak Z-score and mixed forward outlook; this looks fairly priced to slightly overvalued unless operational strength can decisively offset financial risk signals.

AI Exposure / Tech Reliance

As a Software – Application company in the Technology sector, ADP operates in a segment that is structurally positioned to integrate AI-driven automation into core workflows. Software platforms benefit disproportionately from AI because incremental improvements can scale across large client bases with minimal marginal cost. If execution remains strong, the industry backdrop favors resilience and operating leverage.

The Bull Case

A GARP investor could justify ownership based on the extraordinary 66.30% operating margin and a 43.70% ROIC, which signal a capital-light model with elite internal compounding capability. The Piotroski F-Score of 8 reinforces the idea of strong operational discipline and improving fundamentals, while a 5.70% return on equity combined with a modest 26.30% debt/equity ratio suggests leverage is present but not excessive. Despite a TTM yield of 0.7 and a dividend per share of 3.40%, the payout ratio of $6.80 indicates continued capital return capacity, and institutional ownership listed at $268.38 suggests heavy professional participation. When you combine high margins, high ROIC, and strong fundamental scoring, this screens as a quality compounder trading at a mid-teens forward multiple.

The Bear Case

The cracks are visible: an Altman Z-Score of 1.5 places the firm in potential distress territory, which is alarming for a company priced at 18.2x earnings. A PEG of 1.7 alongside projected EPS of $10.44 versus current 11.9 suggests growth deceleration, yet investors are still paying a growth multiple. Short interest at 12.80% of float indicates a meaningful cohort betting against the story, and a current ratio of 1 leaves little liquidity cushion if cash flows falter. With price-to-book at 11.9 and price-to-sales at 3.6, the market is valuing the franchise richly relative to balance sheet equity, amplifying downside if operating momentum weakens.

Market Sentiment & Smart Money

Short Interest %

3.40%

Analyst Consensus

2.84

Average Analyst Price Target

$268.38

Institutional Ownership %

86.30%

1-Year Beta

0.44

Insider Buying % (6 Mo)

0.20%%

Distance to 52-Week High

57.20%%

Distance to 52-Week Low

100.30%%