Performance Comparison: Automatic Data Processing And Competitors In Professional Services Industry
In the dynamic and fiercely competitive business environment, conducting a thorough analysis of companies is crucial for investors and industry enthusiasts. In this article, we will perform an extensive industry comparison, evaluating Automatic Data Processing (NASDAQ:ADP) in relation to its major competitors in the Professional Services industry. By closely examining crucial financial metrics, market position, and growth prospects, we aim to offer valuable insights for investors and shed light on company's performance within the industry.
Automatic Data Processing Background
Automatic Data Processing is a global technology company providing cloud-based human capital management solutions, enabling clients to better implement payroll, talent, time, tax, and benefits administration. Additionally, ADP provides human resource outsourcing solutions that permit customers to offload some of their traditional HR tasks. The company operates through two segments: employer services and professional employer organization services. Employer services consist of the company's HCM products as well as a la carte HRO solutions. PEO services contain ADP's comprehensive HRO solution, where it acts as a co-employer with its customer. As of fiscal 2025, ADP serves over 1.1 million clients and pays over 42 million workers across 140 countries.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Automatic Data Processing Inc | 24.96 | 16.05 | 4.94 | 16.13% | $1.59 | $2.34 | 7.09% |
| Paychex Inc | 24.57 | 10.05 | 6.51 | 9.48% | $0.68 | $1.13 | 16.8% |
| Kanzhun Ltd | 26.80 | 3.56 | 8.33 | 4.49% | $0.69 | $1.86 | 13.17% |
| Paycom Software Inc | 18.93 | 4.90 | 4.29 | 6.31% | $0.2 | $0.41 | 9.16% |
| Paylocity Holding Corp | 36.42 | 7.18 | 5.03 | 4.11% | $0.1 | $0.28 | 12.46% |
| Korn Ferry | 13.52 | 1.78 | 1.23 | 3.73% | $0.14 | $0.64 | 7.02% |
| Robert Half Inc | 17.75 | 2.15 | 0.51 | 3.3% | $0.03 | $0.5 | -7.54% |
| Trinet Group Inc | 20.79 | 24.96 | 0.56 | 31.34% | $0.08 | $0.22 | -1.6% |
| Upwork Inc | 11.40 | 4.13 | 3.64 | 4.74% | $0.03 | $0.16 | 4.1% |
| Insperity Inc | 80.46 | 16.74 | 0.22 | -20.1% | $-0.01 | $0.2 | 3.97% |
| Barrett Business Services Inc | 17.50 | 3.88 | 0.78 | 8.85% | $0.03 | $0.08 | 8.38% |
| Fiverr International Ltd | 32.80 | 1.82 | 1.71 | 1.38% | $0.0 | $0.09 | 8.31% |
| Kforce Inc | 13.86 | 4.30 | 0.42 | 8.3% | $0.02 | $0.09 | -5.85% |
| DLH Holdings Corp | 62 | 0.72 | 0.23 | -0.81% | $0.01 | $0.01 | -15.8% |
| Average | 28.98 | 6.63 | 2.57 | 5.01% | $0.15 | $0.44 | 4.04% |
After examining Automatic Data Processing, the following trends can be inferred:
A Price to Earnings ratio of 24.96 significantly below the industry average by 0.86x suggests undervaluation. This can make the stock appealing for those seeking growth.
With a Price to Book ratio of 16.05, which is 2.42x the industry average, Automatic Data Processing might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.
The Price to Sales ratio of 4.94, which is 1.92x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.
The Return on Equity (ROE) of 16.13% is 11.12% above the industry average, highlighting efficient use of equity to generate profits.
The company exhibits higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $1.59 Billion, which is 10.6x above the industry average, implying stronger profitability and robust cash flow generation.
Compared to its industry, the company has higher gross profit of $2.34 Billion, which indicates 5.32x above the industry average, indicating stronger profitability and higher earnings from its core operations.
The company's revenue growth of 7.09% exceeds the industry average of 4.04%, indicating strong sales performance and market outperformance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is a financial metric that helps determine the level of financial risk associated with a company's capital structure.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.
When evaluating Automatic Data Processing alongside its top 4 peers in terms of the Debt-to-Equity ratio, the following insights arise:
Automatic Data Processing falls in the middle of the list when considering the debt-to-equity ratio.
This indicates that the company has a moderate level of debt relative to its equity with a debt-to-equity ratio of 1.49, suggesting a balanced financial structure with a reasonable debt-equitymix.
Key Takeaways
For Automatic Data Processing in the Professional Services industry, the PE ratio is low compared to peers, indicating potential undervaluation. The PB and PS ratios are high, suggesting overvaluation relative to industry standards. In terms of ROE, EBITDA, gross profit, and revenue growth, Automatic Data Processing demonstrates strong performance compared to its industry peers, reflecting favorable financial health and growth prospects.
This article was generated by Benzinga's automated content engine and reviewed by an editor.