Automatic Data Processing (ADP:NAS) Fundamental Valuation Report

Fundamental Valuation Report

Automatic Data Processing(ADP:NAS)

Industrials:Business Services

This Report was generated using the valuation tools available on For a free 30 day trial click here.

Close Price/Date
$144.72 (USD) 13/11/2018

Weighted Valuation
$142.92 (USD)

Overall Rating
Fairly valued to slightly Overvalued by 1.2%

Valuation Models Analyst Consensus: $153.33 (USD)
(in order of importance) Discounted Cash Flow: $127.30 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (ADP:NAS USD)

Price 144.72
Range 143.04 – 145.86
52 week 108.25 – 151.77
Open 144.96
Vol / Avg. 2.08M/2.15M
Mkt cap 63.11B
P/E 37.30
Div/yield 2.52/0.02
EPS 3.66
Shares 437.73M
Beta 0.92

Company Description

ADP competes in the human resources administration services industry. It provides services that satisfy companies’ human resources needs, such as payroll processing and benefits administration. ADP was founded in 1949 and has its headquarters in Roseland, New Jersey. It serves more than 650,000 clients and has 57,000 employees worldwide.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for ADP:NAS

Using a discounted cash flow model we generated an intrinsic value of $127.30 (USD) for ADP:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

ADP:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $127.30 1% 5% 1% 5%
WACC (or Ke) 7.32 $160.53 $105.12
Terminal Growth Rate 2.30 $107.09 $157.57
Tax Rate 0.25 $136.50 $118.10
Cash Flow 4,374,654,900 $120.44 $134.17
Capital Expenditures 8,020,000 $127.31 $127.29
Long Term Debt 2,007,700,000 $127.53 $127.07

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $106.78 (USD) for ADP:NAS. We also generated a valuation of $95.47 (USD) using other metrics and comparables.
The comparable companies were First Data (FDC:NYS), Fidelity National Info (FIS:NYS), Fiserv (FISV:NAS), Global Payments (GPN:NYS) and Paychex (PAYX:NAS).

Company ADP:NAS End Date Value
Earnings/Share $3.88 (USD)
Book Value/Share $7.90 (USD)
Sales/Share $30.06 (USD)
Cash Flow/Share $5.67 (USD)
EBITDA/Share $6.00 (USD)
Price Based on Comps Adjustment Factor (%)
$85.20 (USD) -30.3
$52.47 (USD) 24.1
$141.18 (USD) 42.6
$99.44 (USD) 9.1
$91.04 (USD) 9.4
39.37 PE Ratio 21.96 9.92 22.63 23.43 29.29 24.53
18.23 PB Ratio 6.64 4.32 3.38 11.09 4.55 9.85
4.79 PS Ratio 4.70 1.74 3.92 5.81 5.15 6.86
25.39 PCF Ratio 18.32 7.86 17.86 23.87 22.41 19.63
23.72 EV to EBITDA 15.18 10.98 14.58 16.04 18.34 15.95


Using a multiples approach we generated a valuation of  $104.74 (USD) for ADP:NAS

Company ADP:NAS End Date Value
Earnings/Share $3.88 (USD)
Book Value/Share $7.90 (USD)
Sales/Share $30.06 (USD)
Cash Flow/Share $5.67 (USD)
EBITDA/Share $6.00 (USD)
Price Based on Comps Adjustment Factor
$108.96 (USD) 0
$80.33 (USD) 0
$111.56 (USD) 0
$127.84 (USD) 0
$95.02 (USD) 0
Ratios Ratio Average
PE Ratio 28.08
PB Ratio 10.16
PS Ratio 3.71
PCF Ratio 22.53
EV to EBITDA 15.84

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  ADP:NAS for the last 10 years was  9.81

We ran the Adjusted Book Value for  ADP:NAS and generated a book value of  $10.66 (USD)
By multiplying these we get an adjusted valuation of  $104.60 (USD)

Analyst Data

In the Stockcalc database there are 3 analysts that provide a valuation for ADP:NAS. The 3 analysts have a concensus valuation for ADP:NAS for 2019 of $153.33 (USD).

ADP:NAS Automatic Data Processing

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
2 3 0 3.8000 Outperform 2018-11-12

Current Price: 144.72 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 5.25 6.01 6.96
# EPS Analysts 4 4 1
Mean Revenue 14,218.10 15,220.00 16,324.80
# Revenue Analysts 2 2 1
Mean Target Price 153.33
Mean Cash Flow 6.09 6.45
Mean EBITDA 3,384.90 3,798.50 4,276.30
Mean Net Income 2,318.90 2,623.20 2,968.30
Mean Debt Outstanding 25,988.70 26,566.90
Mean Tax Rate 25.10 25.00 25.00
Mean Growth Rate
Mean Capital Expenditure 206.90 229.00

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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