Analyzing Automatic Data Processing (ADP) and Its Competitors

Automatic Data Processing (NASDAQ:ADP) is one of 203 publicly-traded companies in the “Professional Services” industry, but how does it compare to its rivals? We will compare Automatic Data Processing to similar companies based on the strength of its analyst recommendations, profitability, risk, earnings, valuation, dividends and institutional ownership.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Automatic Data Processing and its rivals, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Automatic Data Processing	2	9	3	0	2.07
Automatic Data Processing Competitors	1585	6457	9171	431	2.48

Automatic Data Processing presently has a consensus target price of $285.00, indicating a potential downside of 6.11%. As a group, “Professional Services” companies have a potential upside of 24.68%. Given Automatic Data Processing’s rivals stronger consensus rating and higher possible upside, analysts clearly believe Automatic Data Processing has less favorable growth aspects than its rivals.

Risk and Volatility

Automatic Data Processing has a beta of 0.77, suggesting that its share price is 23% less volatile than the S&P 500. Comparatively, Automatic Data Processing’s rivals have a beta of 0.97, suggesting that their average share price is 3% less volatile than the S&P 500.

Profitability

This table compares Automatic Data Processing and its rivals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Automatic Data Processing	20.33%	77.01%	6.67%
Automatic Data Processing Competitors	-0.24%	28.23%	4.31%

Valuation & Earnings

This table compares Automatic Data Processing and its rivals revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Automatic Data Processing	$22.26 billion	$4.41 billion	26.91
Automatic Data Processing Competitors	$3.28 billion	$228.38 million	35.75

Automatic Data Processing has higher revenue and earnings than its rivals. Automatic Data Processing is trading at a lower price-to-earnings ratio than its rivals, indicating that it is currently more affordable than other companies in its industry.

Institutional and Insider Ownership

80.0% of Automatic Data Processing shares are held by institutional investors. Comparatively, 57.4% of shares of all “Professional Services” companies are held by institutional investors. 0.2% of Automatic Data Processing shares are held by insiders. Comparatively, 17.1% of shares of all “Professional Services” companies are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Automatic Data Processing pays an annual dividend of $6.80 per share and has a dividend yield of 2.2%. Automatic Data Processing pays out 60.3% of its earnings in the form of a dividend. As a group, “Professional Services” companies pay a dividend yield of 2.4% and pay out -164.4% of their earnings in the form of a dividend. Automatic Data Processing has raised its dividend for 49 consecutive years. Automatic Data Processing lags its rivals as a dividend stock, given its lower dividend yield and higher payout ratio.

Summary

Automatic Data Processing rivals beat Automatic Data Processing on 9 of the 15 factors compared.

About Automatic Data Processing

Automatic Data Processing, Inc. provides cloud-based human capital management solutions worldwide. It operates in two segments, Employer Services and Professional Employer Organization (PEO). The Employer Services segment offers strategic, cloud-based platforms, and human resources (HR) outsourcing solutions. Its offerings include payroll services, benefits administration, talent management, HR management, workforce management, insurance, retirement, and compliance services, as well as integrated HCM solutions. The PEO Services segment provides HR outsourcing solution to businesses through a co-employment model. This segment offers employee benefits, protection and compliance, talent engagement, expertise, comprehensive outsourcing, and recruitment process outsourcing services. Automatic Data Processing, Inc. was founded in 1949 and is headquartered in Roseland, New Jersey.