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Wall Street JournalPerformance Comparison: Automatic Data Processing And Competitors In Professional Services Industry
In today's rapidly changing and fiercely competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies. In this article, we will conduct a comprehensive industry comparison, evaluating Automatic Data Processing (NASDAQ:ADP) against its key competitors in the Professional Services industry. By examining key financial metrics, market position, and growth prospects, we aim to provide valuable insights for investors and shed light on company's performance within the industry.
Automatic Data Processing Background
Automatic Data Processing 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 permit customers to offload some of their traditional HR tasks. The company operates through two segments: employer services and 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 2025, ADP serves over 1.1 million clients and pays over 42 million workers across 140 countries.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Automatic Data Processing Inc | 25.78 | 16.57 | 5.10 | 16.13% | $1.59 | $2.34 | 7.09% |
| Paychex Inc | 25.16 | 10.29 | 6.67 | 10.07% | $0.7 | $1.15 | 18.28% |
| Kanzhun Ltd | 25.53 | 3.39 | 7.94 | 4.49% | $0.69 | $1.86 | 13.17% |
| Paycom Software Inc | 19.45 | 5.03 | 4.40 | 6.31% | $0.2 | $0.41 | 9.16% |
| Paylocity Holding Corp | 38.13 | 7.52 | 5.27 | 4.11% | $0.1 | $0.28 | 12.46% |
| Korn Ferry | 13.56 | 1.79 | 1.23 | 3.73% | $0.14 | $0.64 | 7.02% |
| Trinet Group Inc | 22.19 | 26.64 | 0.60 | 31.34% | $0.08 | $0.22 | -1.6% |
| Robert Half Inc | 18.12 | 2.19 | 0.52 | 3.3% | $0.03 | $0.5 | -7.54% |
| Upwork Inc | 11.66 | 4.22 | 3.73 | 4.74% | $0.03 | $0.16 | 4.1% |
| Insperity Inc | 89.38 | 18.59 | 0.24 | -20.1% | $-0.01 | $0.2 | 3.97% |
| Barrett Business Services Inc | 18.04 | 4 | 0.81 | 8.85% | $0.03 | $0.08 | 8.38% |
| Fiverr International Ltd | 33.18 | 1.84 | 1.73 | 1.38% | $0.0 | $0.09 | 8.31% |
| Kforce Inc | 14.42 | 4.47 | 0.44 | 8.3% | $0.02 | $0.09 | -5.85% |
| DLH Holdings Corp | 61.56 | 0.71 | 0.23 | -0.81% | $0.01 | $0.01 | -15.8% |
| Average | 30.03 | 6.98 | 2.6 | 5.05% | $0.16 | $0.44 | 4.16% |
By carefully studying Automatic Data Processing, we can deduce the following trends:
The Price to Earnings ratio of 25.78 is 0.86x lower than the industry average, indicating potential undervaluation for the stock.
With a Price to Book ratio of 16.57, which is 2.37x the industry average, Automatic Data Processing might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.
With a relatively high Price to Sales ratio of 5.1, which is 1.96x the industry average, the stock might be considered overvalued based on sales performance.
The company has a higher Return on Equity (ROE) of 16.13%, which is 11.08% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
Compared to its industry, the company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $1.59 Billion, which is 9.94x above the industry average, indicating stronger profitability and robust cash flow generation.
The gross profit of $2.34 Billion is 5.32x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.
With a revenue growth of 7.09%, which surpasses the industry average of 4.16%, the company is demonstrating robust sales expansion and gaining market share.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio assesses the extent to which a company relies on borrowed funds compared to its equity.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.
By considering the Debt-to-Equity ratio, Automatic Data Processing can be compared to its top 4 peers, leading to the following observations:
Automatic Data Processing falls in the middle of the list when considering the debt-to-equity ratio.
This indicates that the company has a moderate level of debt relative to its equity with a debt-to-equity ratio of 1.49, suggesting a balanced financial structure with a reasonable debt-equitymix.
Key Takeaways
The PE, PB, and PS ratios for Automatic Data Processing indicate that it may be undervalued compared to its peers in the Professional Services industry. On the other hand, the high ROE, EBITDA, gross profit, and revenue growth suggest that the company is performing well and has strong financial health relative to its industry counterparts.
This article was generated by Benzinga's automated content engine and reviewed by an editor.