📊 ADP Key Takeaways
Is Automatic Data Processing Inc. (ADP) a Good Investment?
ADP demonstrates exceptional operational profitability with 27.1% operating margin and 54.1% ROE, supported by robust free cash flow of $4.0B and sustainable leverage. However, flat revenue growth of 0.0% YoY combined with an extremely tight liquidity position (1.04x current ratio) signals market maturity and operational constraint; the company is efficiently harvesting profits through buybacks rather than investing in growth.
ADP shows strong underlying fundamentals with high operating and net margins, solid free cash flow generation, and continued bottom-line growth despite flat revenue. Profit growth outpacing sales suggests disciplined cost control and operating efficiency, while liquidity and debt servicing remain sound. The main fundamental constraint is muted top-line growth, which limits the case for a more aggressive rating.
Automatic Data Processing Inc. Key Strengths (ADP)
- Exceptional ROE of 54.1% demonstrates superior capital efficiency and management execution
- Outstanding profitability metrics: 27.1% operating margin and 20.9% net margin indicate pricing power and operational excellence
- Strong free cash flow of $4.0B with 24.4% FCF margin provides sustainable capital for debt service and shareholder returns
- Moderate leverage at 0.63x debt/equity with 13.2x interest coverage ratio ensures financial stability
- High profitability with 25.5% operating margin and 19.7% net margin
- Net income and diluted EPS growth remain healthy despite flat revenue
- Solid financial health with positive free cash flow, adequate liquidity, and strong interest coverage
ADP Stock Risks: Automatic Data Processing Inc. Investment Risks
- Revenue stagnation at 0.0% YoY growth indicates market saturation and lack of organic expansion catalysts
- Dangerously tight liquidity with 1.04x current ratio provides minimal buffer for operational disruptions or market stress
- Unusually low gross margin of 7.9% for a software/services company suggests pricing pressure, high variable costs, or unfavorable product mix
- EPS growth (9.7%) exceeding net income growth (8.7%) reveals reliance on share buybacks masking operational stagnation
- Revenue growth is currently flat, raising questions about near-term organic expansion
- Low ROA relative to ROE suggests asset efficiency looks weak on the reported balance sheet
- Large liability base versus equity leaves less room for balance-sheet deterioration if operating trends weaken
Key Metrics to Watch
- Revenue growth trajectory and organic growth rate in next quarters
- Gross margin trends and ability to improve cost structure
- Current ratio and working capital management given tight liquidity position
- Revenue growth reacceleration
- Operating cash flow and free cash flow consistency
Automatic Data Processing Inc. (ADP) Financial Metrics & Key Ratios
💡 AI Analyst Insight
The 24.4% free cash flow margin provides substantial flexibility for dividends, buybacks, and strategic investments.
ADP Profit Margin, ROE & Profitability Analysis
ADP vs Technology Sector: How Automatic Data Processing Inc. Compares
How Automatic Data Processing Inc. compares to Technology sector averages
Sector benchmarks are approximate industry averages. Actual sector performance may vary.
Is Automatic Data Processing Inc. Stock Overvalued? ADP Valuation Analysis 2026
Based on fundamental analysis, Automatic Data Processing Inc. has mixed fundamental signals relative to the Technology sector in 2026.
Note: This is a fundamental analysis based on SEC filings. For P/E ratio, price targets, and market-based valuation, consult financial data providers. This is not investment advice.
Automatic Data Processing Inc. Balance Sheet: ADP Debt, Cash & Liquidity
ADP Revenue & Earnings Growth: 5-Year Financial Trend
5-Year Trend Summary: Automatic Data Processing Inc.'s revenue has grown significantly by 37% over the 5-year period, indicating strong business expansion. The most recent EPS of $8.21 reflects profitable operations.
ADP Revenue Growth, EPS Growth & YoY Performance
ADP Quarterly Earnings & Performance
| Quarter | Revenue | Net Income | EPS |
|---|---|---|---|
| Q3 2026 | $5.6B | $1.2B | $3.06 |
| Q2 2026 | $5.0B | $963.2M | $2.35 |
| Q1 2026 | $4.8B | $956.3M | $2.34 |
| Q3 2025 | $5.3B | $1.2B | $2.88 |
| Q2 2025 | $4.7B | $878.4M | $2.13 |
| Q1 2025 | $4.5B | $859.4M | $2.08 |
| Q3 2024 | $4.9B | $1.0B | $2.51 |
| Q2 2024 | $4.4B | $813.1M | $1.95 |
Data sourced from SEC EDGAR 10-Q quarterly filings. Figures may represent quarterly or cumulative values.
Automatic Data Processing Inc. Dividends, Buybacks & Capital Allocation
ADP SEC Filings: Latest 10-K & 10-Q Analysis
Access official SEC EDGAR filings for Automatic Data Processing Inc. (CIK: 0000008670)
📋 Recent SEC Filings
❓ Frequently Asked Questions about ADP
What is the AI rating for ADP?
Automatic Data Processing Inc. (ADP) has a Combined AI Grade of A from Claude (B) and ChatGPT (A) with 76% combined confidence, based on fundamental analysis of SEC EDGAR filings.
What are ADP's key strengths?
Claude: Exceptional ROE of 54.1% demonstrates superior capital efficiency and management execution. Outstanding profitability metrics: 27.1% operating margin and 20.9% net margin indicate pricing power and operational excellence. ChatGPT: High profitability with 25.5% operating margin and 19.7% net margin. Net income and diluted EPS growth remain healthy despite flat revenue.
What are the risks of investing in ADP?
Claude: Revenue stagnation at 0.0% YoY growth indicates market saturation and lack of organic expansion catalysts. Dangerously tight liquidity with 1.04x current ratio provides minimal buffer for operational disruptions or market stress. ChatGPT: Revenue growth is currently flat, raising questions about near-term organic expansion. Low ROA relative to ROE suggests asset efficiency looks weak on the reported balance sheet.
What is ADP's revenue and growth?
Automatic Data Processing Inc. reported revenue of $16.5B.
Does ADP pay dividends?
Automatic Data Processing Inc. pays dividends, with $1,943.1M distributed to shareholders in the trailing twelve months.
Where can I find ADP SEC filings?
Official SEC filings for Automatic Data Processing Inc. (CIK: 0000008670) including 10-K, 10-Q, and 8-K reports are available on SEC EDGAR.
What is ADP's EPS?
Automatic Data Processing Inc. has a diluted EPS of $8.49.
How is the AI analysis conducted?
Two independent AI systems — Claude (Anthropic) and ChatGPT (OpenAI) — analyze SEC EDGAR filings including 10-K annual reports and 10-Q quarterly reports. Each AI evaluates financial health, profitability ratios, balance sheet strength, and growth metrics. The combined grade reflects both perspectives for balanced insights.
What is ADP's fundamental grade?
Based on our AI fundamental analysis in June 2026, Automatic Data Processing Inc. has a A grade with 76% confidence. The AI analysis suggests favorable fundamentals based on SEC filings. This is not investment advice.
Is ADP stock overvalued or undervalued?
Valuation metrics for ADP: ROE of 54.1% (sector avg: 22%), net margin of 20.9% (sector avg: 18%). Higher ROE suggests strong returns relative to peers.
What is ADP's AI grade for 2026?
Our dual AI analysis gives Automatic Data Processing Inc. a combined A grade for 2026. Revenue is data pending, with profitability above sector average. Always conduct your own research.
What is ADP's free cash flow?
Automatic Data Processing Inc.'s operating cash flow is $4.0B, with capital expenditures of N/A. FCF margin is 24.4%.
How does ADP compare to other Technology stocks?
Vs Technology sector averages: Net margin 20.9% (avg: 18%), ROE 54.1% (avg: 22%), current ratio 1.04 (avg: 2.5).
Why is ADP's return on equity (ROE) so high?
Automatic Data Processing Inc. has a return on equity of 54.1%, significantly above the Technology sector average of 22%. A high ROE indicates the company is efficient at generating profits from shareholder equity. This is supported by a 20.9% net margin.