ADP
Automatic Data Processing Inc.
TMT, Finance/Real Estate
02/10/2020
Presented
| Date | 02/04/2020 |
| Price | $175.92 |
| Market Cap | $75.96B |
| Ent Value | $74.84B |
| P/E Ratio | 31.07x |
| Book Value | $12.42 |
| Div Yield | 2.07% |
| Shares O/S | 431.80M |
| Ave Daily Vol | 1,792,582 |
| Short Int | 1.11% |
Current
| Price | $290.04 |
| Market Cap | $118.29B |
| Automatic Data Processing, Inc. engages in the provision of business outsourcing solutions specializes in cloud-based human capital management. It operates through the following business segments: Employer Services; and Professional Employer Organization Services; and Other. The Employer Services segment provides clients ranging from single-employee small businesses to large enterprises with tens of thousands of employees around the world, offering a range of human resources outsourcing and technology-based human capital management solutions, including strategic, cloud-based platforms. The Professional Employer Organization Services segment offers small and mid-sized businesses a human resources outsourcing solution through a co-employment mode. The Other segment comprises of non-recurring gains and losses; miscellaneous processing services; the elimination of intercompany transactions; and interest expense. The company was founded by Henry Taub in 1949 and is headquartered in Roseland, NJ. |
Publicly traded companies mentioned herein: Automatic Data Processing Inc (ADP), Ceridian HCM Holding Inc (CDAY), Paycom Software Inc (PAYC), Paylocity Holding Corp (PCTY), Workday Inc (WDAY)
Highlights
The presenter is short shares of Automatic Data Processing Inc (ADP), citing weakening fundamentals, increased competition, and a lack of opportunities to reverse trends. ADP has an off-cycle fiscal year (FY2020 ends June 30, 2020) and in 1H’20 the company has seen weakness in bookings growth relative to historical trends. Share prices declined after each quarter was reported, yet the stock quickly reverted to all-time highs both times. ADP is currently priced at ~$175 per share. Bullish investors justify ADP’s ~28x FY20 P/E multiple (near all-time high) on consensus expectations by pointing to other employer services companies with high multiples, yet the presenter notes that ADP’s growth outlook is less attractive than peers. In addition, the company’s valuation premium over the S&P 500 is at a historical high. As ADP’s trends continue to weaken over the back half of FY2020, the presenter expects ADP’s multiple to rerate and share prices to fall.
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