Performance Comparison: Automatic Data Processing And Competitors In Professional Services Industry

In the fast-paced and highly competitive business world of today, conducting thorough company analysis is essential for investors and industry observers. In this article, we will conduct an extensive industry comparison, evaluating Automatic Data Processing ADP in relation to its major competitors in the Professional Services industry. Through a detailed examination of key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and illuminate company's performance in the industry.

Automatic Data Processing Background

ADP is a provider of payroll and human capital management solutions servicing the full scope of businesses from micro to global enterprises. ADP was established in 1949 and serves over 1 million clients primarily in the United States. ADP's employer services segment offers payroll, human capital management solutions, human resources outsourcing, insurance and retirement services. The smaller but faster-growing professional employer organization segment provides HR outsourcing solutions to small and midsize businesses through a co-employment model.

When closely examining Automatic Data Processing, the following trends emerge:

• At 27.6, the stock's Price to Earnings ratio is 0.17x less than the industry average, suggesting favorable growth potential.

• Considering a Price to Book ratio of 27.52, which is well below the industry average by 0.67x, the stock may be undervalued based on its book value compared to its peers.

• The Price to Sales ratio of 5.53, which is 2.21x the industry average, suggests the stock could potentially be overvalued in relation to its sales performance compared to its peers.

• The company has a higher Return on Equity (ROE) of 24.62%, which is 17.67% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.

• The company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $1.33 Billion, which is 13.3x above the industry average, indicating stronger profitability and robust cash flow generation.

• With higher gross profit of $1.8 Billion, which indicates 5.81x above the industry average, the company demonstrates stronger profitability and higher earnings from its core operations.

• The company's revenue growth of 5.79% exceeds the industry average of 4.76%, indicating strong sales performance and market outperformance.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio is an important measure to assess the financial structure and risk profile of a company.

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 examining Automatic Data Processing in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:

• Automatic Data Processing is in a relatively stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.96.

• This implies that the company relies less on debt financing and has a more favorable balance between debt and equity.

Key Takeaways

Automatic Data Processing (ADP) has a low PE ratio, indicating that its stock price is relatively low compared to its earnings. The low PB ratio suggests that the stock is undervalued based on its book value. However, the high PS ratio indicates that the stock is trading at a premium compared to its sales. ADP's high ROE, EBITDA, gross profit, and revenue growth indicate strong financial performance compared to its peers in the Professional Services industry.

This article was generated by Benzinga's automated content engine and reviewed by an editor.