📊 ADP Key Takeaways
Is Automatic Data Processing Inc. (ADP) a Good Investment?
ADP demonstrates exceptional profitability with strong operating margins (25.5%) and net margins (19.7%), supported by robust ROE of 32.5% and consistent net income growth of 8.7% YoY despite flat revenue. The company generates substantial free cash flow ($1.8B) with healthy interest coverage (10.4x), though minimal debt and strong equity returns indicate efficient capital deployment despite modest revenue expansion.
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.
Why Buy Automatic Data Processing Inc. Stock? ADP Key Strengths
- Exceptional operating margin of 25.5% demonstrates pricing power and operational efficiency
- Strong net income growth of 8.7% YoY despite flat revenue indicates margin expansion and cost control
- High return on equity of 32.5% shows efficient capital deployment and shareholder value creation
- Solid free cash flow generation of $1.8B with 16.9% FCF margin supports sustainability
- Conservative balance sheet with debt-to-equity ratio of 0.62x and strong interest coverage of 10.4x
- 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 growth stalled at 0.0% YoY, signaling market saturation or competitive pressures in core business segments
- Thin gross margin of 12.4% relative to operating margin suggests heavy reliance on operating leverage rather than pricing power
- Current ratio of 1.03x indicates tight liquidity with minimal cushion for operational shocks or unexpected obligations
- Total liabilities of $78.2B represent 92.8% of total assets, creating material leverage despite favorable debt-to-equity ratio
- Low ROA of 2.5% relative to 32.5% ROE indicates significant financial leverage dependency for equity returns
- 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 - critical to assess whether flat growth is cyclical or structural decline
- Operating margin sustainability - monitor if 25.5% margins can be maintained during potential revenue acceleration
- Free cash flow conversion and consistency - ensure $1.8B FCF generation continues to fund operations and shareholder returns
- Debt-to-total capitalization trend - track leverage ratios given high absolute debt levels despite conservative relative metrics
- Insider activity patterns - monitor Form 4 filings (14 in 90 days) for directional sentiment on management's confidence
- Revenue growth reacceleration
- Operating cash flow and free cash flow consistency
Automatic Data Processing Inc. (ADP) Financial Metrics & Key Ratios
💡 AI Analyst Insight
Automatic Data Processing Inc. presents a mixed fundamental picture. Review the detailed metrics above to form your own investment thesis.
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 |
|---|---|---|---|
| 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 |
| Q1 2024 | $4.2B | $779.0M | $1.87 |
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 Rating of BUY from Claude (BUY) and ChatGPT (BUY) with 78% combined confidence, based on fundamental analysis of SEC EDGAR filings.
What are ADP's key strengths?
Claude: Exceptional operating margin of 25.5% demonstrates pricing power and operational efficiency. Strong net income growth of 8.7% YoY despite flat revenue indicates margin expansion and cost control. 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 growth stalled at 0.0% YoY, signaling market saturation or competitive pressures in core business segments. Thin gross margin of 12.4% relative to operating margin suggests heavy reliance on operating leverage rather than pricing power. 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 $10.5B.
Does ADP pay dividends?
Automatic Data Processing Inc. pays dividends, with $1,256.0M 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 $5.12.
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 rating reflects both perspectives for balanced insights.
Is ADP a good stock to buy right now?
Based on our AI fundamental analysis in April 2026, Automatic Data Processing Inc. has a BUY rating with 78% 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 32.5% (sector avg: 22%), net margin of 19.7% (sector avg: 18%). Higher ROE suggests strong returns relative to peers.
Should I buy ADP stock in 2026?
Our dual AI analysis gives Automatic Data Processing Inc. a combined BUY rating 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 $1.8B, with capital expenditures of N/A. FCF margin is 16.9%.
How does ADP compare to other Technology stocks?
Vs Technology sector averages: Net margin 19.7% (avg: 18%), ROE 32.5% (avg: 22%), current ratio 1.03 (avg: 2.5).
Why is ADP's return on equity (ROE) so high?
Automatic Data Processing Inc. has a return on equity of 32.5%, 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 19.7% net margin.