In the ever-evolving and intensely competitive business landscape, conducting a thorough company analysis is of utmost importance for investors and industry followers. In this article, we will carry out an in-depth industry comparison, assessing Automatic Data Processing ADP alongside its primary competitors in the Professional Services industry. By meticulously examining key financial metrics, market positioning, and growth prospects, we aim to offer valuable insights to investors and shed light on company's performance within 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 | 27.61 | 27.54 | 5.53 | 24.62% | $1.33 | $1.8 | 5.79% |
| Paychex Inc | 25.97 | 11.93 | 8.21 | 11.04% | $0.57 | $0.89 | 5.68% |
| Paycom Software Inc | 33.30 | 7.89 | 6.93 | 5.32% | $0.13 | $0.34 | 21.59% |
| Ceridian HCM Holding Inc | 2122 | 4.38 | 6.90 | -0.17% | $0.06 | $0.16 | 19.61% |
| Robert Half Inc | 18.99 | 5.63 | 1.35 | 5.96% | $0.16 | $0.64 | -14.71% |
| Paylocity Holding Corp | 61.72 | 9.94 | 7.23 | 3.98% | $0.06 | $0.22 | 25.39% |
| Trinet Group Inc | 19.28 | 584.28 | 1.42 | 20.32% | $0.15 | $0.27 | -1.53% |
| ASGN Inc | 20.36 | 2.29 | 1.01 | 3.1% | $0.12 | $0.32 | -6.77% |
| Insperity Inc | 23.38 | 51.59 | 0.68 | 41.5% | $0.08 | $0.26 | 7.76% |
| ManpowerGroup Inc | 17.56 | 1.57 | 0.21 | 1.25% | $0.1 | $0.82 | -2.61% |
| Korn Ferry | 28.57 | 1.79 | 1.02 | -0.11% | $0.03 | $0.63 | -3.16% |
| First Advantage Corp | 54.17 | 2.57 | 2.99 | 1.09% | $0.06 | $0.1 | -2.73% |
| Kforce Inc | 24.10 | 7.13 | 0.80 | 5.77% | $0.02 | $0.1 | -14.74% |
| HireRight Holdings Corp | 141.67 | 1.88 | 1.30 | -0.35% | $0.05 | $0.09 | -10.48% |
| Kelly Services Inc | 32.78 | 0.61 | 0.16 | 0.52% | $0.02 | $0.23 | -4.27% |
| Barrett Business Services Inc | 16.24 | 4.09 | 0.73 | 10.17% | $0.03 | $0.07 | -0.18% |
| Heidrick & Struggles International Inc | 10.41 | 1.28 | 0.57 | 3.46% | $0.03 | $0.07 | 3.73% |
| DLH Holdings Corp | 155.50 | 2.14 | 0.60 | -2.53% | $0.0 | $0.02 | 50.95% |
| Average | 165.06 | 41.23 | 2.48 | 6.49% | $0.1 | $0.31 | 4.33% |
Through a thorough examination of Automatic Data Processing, we can discern the following trends:
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With a Price to Earnings ratio of 27.61, which is 0.17x less than the industry average, the stock shows potential for growth at a reasonable price, making it an interesting consideration for market participants.
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With a Price to Book ratio of 27.54, significantly falling below the industry average by 0.67x, it suggests undervaluation and the possibility of untapped growth prospects.
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The stock's relatively high Price to Sales ratio of 5.53, surpassing the industry average by 2.23x, 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 24.62%, which is 18.13% 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 has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $1.33 Billion, which is 13.3x above the industry average, indicating 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 4.33%, showcasing exceptional sales performance and strong demand for its products or services.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio indicates the proportion of debt and equity used by a company to finance its assets and operations.
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.
In terms of the Debt-to-Equity ratio, Automatic Data Processing can be assessed by comparing it to its top 4 peers, resulting in the following observations:
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Compared to its top 4 peers, Automatic Data Processing has a stronger financial position indicated by its lower debt-to-equity ratio of 0.96.
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This suggests that the company relies less on debt financing and has a more favorable balance between debt and equity, which can be seen as a positive attribute by investors.
Key Takeaways
The valuation analysis for Automatic Data Processing (ADP) in the Professional Services industry reveals the following insights.
In terms of PE, PB, and PS ratios, ADP demonstrates a low valuation compared to its peers. This suggests that ADP may be undervalued in the market, potentially making it an attractive investment opportunity.
Regarding ROE, EBITDA, gross profit, and revenue growth, ADP exhibits high performance compared to its industry peers. This indicates that ADP is efficiently utilizing its resources and experiencing strong growth, positioning it favorably within the Professional Services sector.
Overall, the valuation analysis suggests that ADP has a strong financial standing and is well-positioned for future growth in the industry.
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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