Automatic Data Processing Inc (ADP, Financial) has recently captured the attention of investors and financial analysts with its strong financial performance. With a current share price of $283.24, despite a minor daily loss of 0.49%, ADP has shown a significant three-month gain of 20.38%. A detailed analysis, supported by the GF Score, indicates that Automatic Data Processing Inc is poised for substantial future growth.
What Is the GF Score?
The GF Score is a proprietary stock performance ranking system from 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 higher returns. The GF Score ranges from 0 to 100, with 100 indicating the highest potential for outperformance. Automatic Data Processing Inc boasts a GF Score of 95, signaling significant growth potential.
- Financial strength rank: 7/10
- Profitability rank: 9/10
- Growth rank: 10/10
- GF Value rank: 6/10
- Momentum rank: 8/10
Understanding Automatic Data Processing Inc's Business
Automatic Data Processing Inc, with a market cap of $115.51 billion and annual sales of $19.20 billion, operates with a robust operating margin of 25.85%. Founded in 1949, ADP serves over 1 million clients, offering a range of services from payroll to human capital management, primarily in the United States. Its smaller, rapidly growing professional employer organization segment provides HR outsourcing solutions to small and midsize businesses through a co-employment model.
Financial Strength Breakdown
Automatic Data Processing Inc's financial strength is evident in its Interest Coverage ratio of 13.74, significantly above the benchmark of 5 set by Benjamin Graham. This strong ratio highlights ADP's ability to cover its interest obligations comfortably. Additionally, its Debt-to-Revenue ratio stands at 0.19, showcasing prudent debt management and solid financial health.
Profitability and Growth Metrics
ADP's profitability is impressive, with an increasing Operating Margin over the past five years, reaching 25.94% in 2024. Its Gross Margin also reflects a consistent upward trend, indicating enhanced efficiency in revenue conversion into profit. The company's growth is robust, with a 3-Year Revenue Growth Rate of 9.9%, outperforming over half of its industry peers.
Conclusion
Considering Automatic Data Processing Inc's strong financial strength, impressive profitability, and consistent growth metrics, the GF Score highlights the company's exceptional position for potential market outperformance. Investors looking for similar opportunities can explore more companies with strong GF Scores using the GF Score Screen.
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.
