Automatic Data Processing Inc (ADP, Financial) has recently garnered attention from the investment community, showcasing a solid financial profile that promises significant growth. With a current share price of $247.62, ADP has enjoyed a modest daily increase of 0.22% and an impressive three-month appreciation of 18.16%. A deep dive into the company's GF Score reveals a company poised for substantial future growth, reflecting its strong market position and potential for outperformance.
What Is the GF Score?
The GF Score is an exclusive stock performance ranking system by GuruFocus, which evaluates stocks based on five key aspects of valuation. These aspects have shown a strong correlation with long-term stock performance from 2006 to 2021. Stocks with higher GF Scores typically yield better returns than those with lower scores, making the GF Score a valuable tool for investors seeking high-performing investments. The GF Score ranges from 0 to 100, with 100 indicating the highest potential for outperformance.
- Financial strength rank: 6/10
- Profitability rank: 9/10
- Growth rank: 10/10
- GF Value rank: 6/10
- Momentum rank: 7/10
Each component of the GF Score is individually ranked, with each rank positively correlated with long-term stock performance. The GF Score is calculated by weighing these key aspects differently based on their impact on stock price performance. With a high profitability rank and an exceptional growth rank, Automatic Data Processing Inc has been assigned a GF Score of 94 out of 100, signaling a strong potential for market outperformance.
Understanding Automatic Data Processing Inc's Business
Automatic Data Processing Inc, with a market capitalization of $101.7 billion and annual sales of $17.67 billion, is a leading provider of payroll and human capital management solutions. Founded in 1949, ADP serves over 1 million clients, primarily in the United States. The company's employer services segment offers a comprehensive suite of services including payroll, human capital management, HR outsourcing, insurance, and retirement services. The smaller, yet rapidly growing professional employer organization segment delivers HR outsourcing solutions to small and midsize businesses through a co-employment model. ADP's operating margin stands at a healthy 21.39%, reflecting its operational efficiency and profitability.
Financial Strength Breakdown
Automatic Data Processing Inc's Financial Strength rating indicates a resilient balance sheet capable of withstanding economic fluctuations. The company's Interest Coverage ratio of 12.69 is a testament to its ability to comfortably meet interest obligations, aligning with the principles of esteemed investor Benjamin Graham. Additionally, ADP's strategic debt management is evidenced by its Debt-to-Revenue ratio of 0.19, further solidifying its financial stability.
Profitability Rank Breakdown
The Profitability Rank highlights Automatic Data Processing Inc's exceptional ability to generate profits compared to its industry peers. The company's Operating Margin has consistently increased over the past five years, reaching 21.48% in 2023. This upward trend is mirrored in ADP's Gross Margin, which has also shown steady growth, indicating an increasing efficiency in converting revenue into profit. The Piotroski F-Score and a Predictability Rank of 5 stars further affirm ADP's robust financial health and consistent operational performance.
Growth Rank Breakdown
Automatic Data Processing Inc's high Growth Rank reflects its dedication to business expansion. The company's 3-Year Revenue Growth Rate of 8.4% surpasses 60.82% of companies in the Business Services industry. ADP's EBITDA has also experienced significant growth, with a three-year growth rate of 13.1 and a five-year rate of 13.2, highlighting its ability to sustain growth and profitability.
Conclusion: ADP's Position for Potential Outperformance
Considering Automatic Data Processing Inc's financial strength, profitability, and growth metrics, the GF Score underscores the firm's exceptional position for potential outperformance. Investors seeking companies with similar robust financial profiles can explore more options using the GF Score Screen. With ADP's strong foundation and upward trajectory, it stands as a compelling choice for value investors looking to capitalize on market leadership and growth potential.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
