Amidst today's fast-paced and highly competitive business environment, it is crucial for investors and industry enthusiasts to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Automatic Data Processing ADP in comparison to its major competitors within the Professional Services industry. By analyzing critical financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of company's performance in the industry.
Automatic Data Processing Background
ADP is a provider of payroll and human capital management solutions servicing the full scope of businesses from micro to global enterprises. ADP was established in 1949 and serves over 1 million clients primarily in the United States. ADP's employer services segment offers payroll, human capital management solutions, human resources outsourcing, insurance and retirement services. The smaller but faster-growing professional employer organization segment provides HR outsourcing solutions to small and midsize businesses through a co-employment model.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Automatic Data Processing Inc | 27.59 | 27.51 | 5.53 | 24.62% | $1.33 | $1.8 | 5.79% |
| Paychex Inc | 28.99 | 12.87 | 9.11 | 11.84% | $0.6 | $0.93 | 6.62% |
| Paycom Software Inc | 34.94 | 8.28 | 7.27 | 5.32% | $0.13 | $0.34 | 21.59% |
| Ceridian HCM Holding Inc | 2219.33 | 4.59 | 7.21 | -0.17% | $0.06 | $0.16 | 19.61% |
| Paylocity Holding Corp | 63.73 | 10.27 | 7.46 | 3.98% | $0.06 | $0.22 | 25.39% |
| Robert Half Inc | 19.49 | 5.77 | 1.38 | 5.96% | $0.16 | $0.64 | -14.71% |
| Trinet Group Inc | 20.02 | 606.60 | 1.48 | 20.32% | $0.15 | $0.27 | -1.53% |
| ASGN Inc | 20.57 | 2.31 | 1.02 | 3.1% | $0.12 | $0.32 | -6.77% |
| Insperity Inc | 23.49 | 51.84 | 0.69 | 41.5% | $0.08 | $0.26 | 7.76% |
| ManpowerGroup Inc | 17.74 | 1.59 | 0.21 | 1.25% | $0.1 | $0.82 | -2.61% |
| Korn Ferry | 29.38 | 1.85 | 1.05 | -0.11% | $0.03 | $0.63 | -3.16% |
| First Advantage Corp | 55.38 | 2.62 | 3.06 | 1.09% | $0.06 | $0.1 | -2.73% |
| Kforce Inc | 25.33 | 7.49 | 0.84 | 5.77% | $0.02 | $0.1 | -14.74% |
| HireRight Holdings Corp | 144.44 | 1.92 | 1.33 | -0.35% | $0.05 | $0.09 | -10.48% |
| Barrett Business Services Inc | 16.67 | 4.20 | 0.74 | 10.17% | $0.03 | $0.07 | -0.18% |
| Kelly Services Inc | 32.97 | 0.61 | 0.16 | 0.52% | $0.02 | $0.23 | -4.27% |
| Heidrick & Struggles International Inc | 10.75 | 1.32 | 0.58 | 3.46% | $0.03 | $0.07 | 3.73% |
| DLH Holdings Corp | 137.20 | 1.88 | 0.53 | -2.53% | $0.0 | $0.02 | 50.95% |
| Average | 170.61 | 42.71 | 2.6 | 6.54% | $0.1 | $0.31 | 4.38% |
By closely studying Automatic Data Processing, we can observe the following trends:
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The stock's Price to Earnings ratio of 27.59 is lower than the industry average by 0.16x, suggesting potential value in the eyes of market participants.
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With a Price to Book ratio of 27.51, significantly falling below the industry average by 0.64x, it suggests undervaluation and the possibility of untapped growth prospects.
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With a relatively high Price to Sales ratio of 5.53, which is 2.13x the industry average, the stock might be considered overvalued based on sales performance.
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The company has a higher Return on Equity (ROE) of 24.62%, which is 18.08% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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The company exhibits higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $1.33 Billion, which is 13.3x above the industry average, implying stronger profitability and robust cash flow generation.
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The company has higher gross profit of $1.8 Billion, which indicates 5.81x above the industry average, indicating stronger profitability and higher earnings from its core operations.
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The company's revenue growth of 5.79% is notably higher compared to the industry average of 4.38%, showcasing exceptional sales performance and strong demand for its products or services.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is a financial metric that helps determine the level of financial risk associated with a company's capital structure.
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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Automatic Data Processing demonstrates a stronger financial position compared to its top 4 peers in the sector.
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With a lower debt-to-equity ratio of 0.96, the company relies less on debt financing and maintains a healthier balance between debt and equity, which can be viewed positively by investors.
Key Takeaways
Automatic Data Processing (ADP) has a low PE ratio, indicating that it is undervalued compared to its peers in the Professional Services industry. The low PB ratio suggests that ADP's stock price is also undervalued relative to its book value. However, the high PS ratio implies that ADP's stock price is relatively high compared to its revenue. On the other hand, ADP's high ROE, EBITDA, gross profit, and revenue growth indicate strong financial performance compared to its industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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