Automatic Data Processing (ADP) Offering Great Entry Point And Long-Term Fundamentals

Waiting for a great trade can take time. The wait is over for Automatic Data Processing, Inc. ADP as it is at a great buying point right now. 

Here's why. 

The Trade Setup

Going back to 2009, except for the quick "COVID" selloff in 2020, ADP is in a long-term rising channel. The price tends to fall 15% to 20% and then rally back to the highs of the channel.
The rallies back to the top of the channel have been 25% or much more, depending on how long the trade is held.

For a short-term trade, consider limiting the risk to 6% to 10% downside. That keeps the reward:risk attractive. For example, keep downside risk to 6% in order to make 20% or more.

There is also the option to hold the stock for the long-term, and there is strong evidence to support that.

Buying ADP for the Fundamentals and the Dividend

ADP is at an attractive buy point technically, but it is also a strong fundamental performer. 

  • It has increased earnings per share (EPS) at an average rate of 14.2% over the last five years. Analysts expect 14.6% yearly EPS growth over the next five years. 

  • ADP has increased its dividend for 48 consecutive years. The stock currently yields 2.2%, and the dividend payout amount has increased 14.7% per year over the last five years.

  • Automatic Data Processing returns have outpaced the S&P 500 returns by 5.7% per year over the last decade. The S&P 500 has an annualized return of 12.5% over that time frame, and ADP has an annualized return of 18.2%. Going back to 2000, ADP returns have more than doubled SPDR S&P 500 ETF Trust SPY returns.

Chart source: TradingView

ADP has been a long-term steady performer. It continually raises its dividend, has outpaced S&P 500 returns for decades, and is at an attractive buy point technically. 

Automatic Data Processing provides human resources solutions to small and a large business, as well payroll, retirement, and insurance services.

Disclaimer: The author has no current positions, but may initiate a position over the next week in the $219 to $226 price region.

Posted In: MarketsTrading IdeasADPcontributorsExpert Ideas
We simplify the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...