Amidst today's fast-paced and highly competitive business environment, it is crucial for investors and industry enthusiasts to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Automatic Data Processing (NASDAQ:ADP) in comparison to its major competitors within the Professional Services industry. By analyzing critical financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of company's performance in the industry.
Automatic Data Processing Background
ADP is a global, cloud-based human capital management provider offering payroll, compliance, talent management, benefits administration, and retirement services. The firm also provides human resources outsourcing services, including PEO offerings, enabling clients to reduce HR overhead. Its broad suite serves customers of all sizes across diverse sectors, and the firm holds large shares in its core markets. As of fiscal 2026, ADP counts over 1.1 million clients and manages payroll for more than 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 | 23.93 | 17.20 | 4.81 | 15.81% | $1.53 | $2.51 | 6.77% |
| Paychex Inc | 19.70 | 9.54 | 5.39 | 11.55% | $0.74 | $1.2 | 5.88% |
| Paycom Software Inc | 23.34 | 17.40 | 5.38 | 15.53% | $0.22 | $0.44 | 9.84% |
| Paylocity Holding Corp | 29.01 | 6.20 | 4.41 | 5.02% | $0.11 | $0.3 | 10.98% |
| Korn Ferry | 13.51 | 1.95 | 1.25 | 3.42% | $0.12 | $0.67 | 6.86% |
| Robert Half Inc | 31.97 | 3.12 | 0.69 | 2.16% | $-0.04 | $0.47 | -2.44% |
| First Advantage Corp | 124.07 | 2.47 | 1.94 | 1.31% | $0.12 | $0.2 | 14.88% |
| Trinet Group Inc | 16.81 | 23.28 | 0.62 | 50.96% | $0.11 | $0.25 | -4.85% |
| ManpowerGroup Inc | 25.68 | 1.26 | 0.14 | 2.57% | $0.14 | $0.78 | 7.54% |
| Upwork Inc | 10.35 | 1.65 | 1.40 | 4.3% | $0.04 | $0.15 | -1.68% |
| Kforce Inc | 24.19 | 7.43 | 0.66 | 10.23% | $0.02 | $0.1 | 4.49% |
| Barrett Business Services Inc | 23.02 | 3.67 | 0.62 | 6.29% | $0.02 | $0.06 | 3.77% |
| Fiverr International Ltd | 10.57 | 0.70 | 0.75 | 1.04% | $0.01 | $0.08 | -10.0% |
| Mastech Digital Inc | 42.71 | 0.95 | 0.50 | -0.11% | $0.0 | $0.01 | -15.58% |
| Average | 30.38 | 6.12 | 1.83 | 8.79% | $0.12 | $0.36 | 2.28% |
After a detailed analysis of Automatic Data Processing, the following trends become apparent:
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At 23.93, the stock's Price to Earnings ratio is 0.79x less than the industry average, suggesting favorable growth potential.
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With a Price to Book ratio of 17.2, which is 2.81x 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.
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The stock's relatively high Price to Sales ratio of 4.81, surpassing the industry average by 2.63x, may indicate an aspect of overvaluation in terms of sales performance.
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The company has a higher Return on Equity (ROE) of 15.81%, which is 7.02% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.
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The company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $1.53 Billion, which is 12.75x above the industry average, indicating stronger profitability and robust cash flow generation.
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The gross profit of $2.51 Billion is 6.97x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.
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The company is experiencing remarkable revenue growth, with a rate of 6.77%, outperforming the industry average of 2.28%.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio helps evaluate the capital structure and financial leverage 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:
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Among its top 4 peers, Automatic Data Processing has a stronger financial position with a lower debt-to-equity ratio of 0.87.
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This indicates that the company relies less on debt financing and maintains a more favorable balance between debt and equity, which can be viewed positively by investors.
Key Takeaways
For Automatic Data Processing in the Professional Services industry, the PE ratio is low compared to peers, indicating potential undervaluation. The PB ratio is high, suggesting the market values the company's assets more than its earnings. The PS ratio is also high, reflecting strong sales performance relative to market value. In terms of ROE, EBITDA, gross profit, and revenue growth, Automatic Data Processing demonstrates high profitability and growth potential compared to industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
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