In today's rapidly changing and fiercely competitive business landscape, it is vital for investors and industry enthusiasts to carefully evaluate companies. In this article, we will perform a comprehensive industry comparison, evaluating Automatic Data Processing (NASDAQ:ADP) against its key competitors in the Professional Services industry. By analyzing important 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 | 25.61 | 16.46 | 5.06 | 16.13% | $1.59 | $2.34 | 7.09% |
| Paychex Inc | 25.06 | 10.13 | 6.98 | 9.48% | $0.68 | $1.13 | 16.8% |
| Kanzhun Ltd | 27.26 | 3.60 | 8.48 | 4.49% | $0.69 | $1.86 | 13.17% |
| Paycom Software Inc | 20.64 | 5.34 | 4.67 | 6.31% | $0.2 | $0.41 | 9.16% |
| Paylocity Holding Corp | 36.58 | 7.21 | 5.05 | 4.11% | $0.1 | $0.28 | 12.46% |
| Korn Ferry | 14.17 | 1.84 | 1.25 | 3.5% | $0.12 | $0.63 | 4.8% |
| Trinet Group Inc | 20.99 | 25.20 | 0.56 | 31.34% | $0.08 | $0.22 | -1.6% |
| Robert Half Inc | 17.41 | 2.11 | 0.50 | 3.3% | $0.03 | $0.5 | -7.54% |
| Upwork Inc | 11.25 | 4.07 | 3.60 | 4.74% | $0.03 | $0.16 | 4.1% |
| Insperity Inc | 74.88 | 15.58 | 0.20 | -20.1% | $-0.01 | $0.2 | 3.97% |
| Heidrick & Struggles International Inc | 34.27 | 2.41 | 1.03 | 3.52% | $0.02 | $0.07 | 15.94% |
| Barrett Business Services Inc | 16.78 | 3.73 | 0.75 | 8.85% | $0.03 | $0.08 | 8.38% |
| Fiverr International Ltd | 35.80 | 1.99 | 1.87 | 1.38% | $0.0 | $0.09 | 8.31% |
| Kforce Inc | 13.15 | 4.08 | 0.40 | 8.3% | $0.02 | $0.09 | -5.85% |
| DLH Holdings Corp | 19.38 | 0.78 | 0.25 | 0.26% | $0.01 | $0.02 | -17.23% |
| Average | 26.26 | 6.29 | 2.54 | 4.96% | $0.14 | $0.41 | 4.63% |
Upon a comprehensive analysis of Automatic Data Processing, the following trends can be discerned:
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At 25.61, the stock's Price to Earnings ratio is 0.98x less than the industry average, suggesting favorable growth potential.
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With a Price to Book ratio of 16.46, which is 2.62x 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.
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The stock's relatively high Price to Sales ratio of 5.06, surpassing the industry average by 1.99x, may indicate an aspect of overvaluation in terms of sales performance.
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The company has a higher Return on Equity (ROE) of 16.13%, which is 11.17% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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With higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $1.59 Billion, which is 11.36x above the industry average, the company demonstrates stronger profitability and robust cash flow generation.
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With higher gross profit of $2.34 Billion, which indicates 5.71x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.
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The company's revenue growth of 7.09% is notably higher compared to the industry average of 4.63%, showcasing exceptional sales performance and strong demand for its products or services.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is an important measure to assess the financial structure and risk profile of a company.
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.
When examining Automatic Data Processing in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:
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Among its top 4 peers, Automatic Data Processing is placed in the middle with a moderate debt-to-equity ratio of 1.49.
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This implies a balanced financial structure, with a reasonable proportion of debt and equity.
Key Takeaways
For Automatic Data Processing in the Professional Services industry, the PE ratio is low compared to peers, indicating potential undervaluation. The PB ratio is high, suggesting the market values the company's assets more than its earnings. The PS ratio is also high, reflecting strong sales relative to market value. In terms of ROE, EBITDA, gross profit, and revenue growth, Automatic Data Processing outperforms its industry peers, showcasing efficient operations and robust financial performance.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
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