AUTOMATIC DATA PROCESSING INC

ADP
About the company

Automatic Data Processing, Inc. provides cloud-based human capital management (HCM) solutions worldwide. It operates in two segments, Employer Services and Professional Employer Organization (PEO). The Employer Services segment offers strategic, cloud-based platforms, and human resources (HR) outsourcing solutions.

Country: United StatesPrice: $261.80Market Cap: $103.7B

Investment snapshot

25%positive consensus
Scored 37d ago

Positive

4

BUY / PASS

Neutral / negative

7 / 4

NEUTRAL / FAIL

Median fair value

$136.24

-48.0% vs price

Models with upside

0 / 16

Positive margin of safety

Strongest signal

6 of 8 pass — Lynch and Sleep object

Key risk

ADP overvalued: all 8 models price fair value below $261.80 (median $136.24)

Framework analysis

VerdictMeaning
BUYPositive purchase signal: the framework's buy requirements are met.
PASSThe company clears the framework's checklist or screen, but the framework does not produce a buy signal. For valuation frameworks this often means margin of safety is missing, insufficient, or unavailable; some screen-only frameworks have no intrinsic-value BUY state.
NEUTRALNeither a positive nor negative conclusion. It does not mean to hold an existing position.
FAILThe company does not clear the framework's requirements.
RankedRanked strategies do not use PASS: selected cohort is BUY, outside the cohort is FAIL, and unranked is NEUTRAL.
Scored from 10-K37d ago
MetricO'Shaughnessy

Systematic Factor Composite

Lynch

GARP

Buffett

Quality Compounder

Pabrai

Dhandho Framework

Akre

Three-Legged Stool

Schloss

Asset-Value Discipline

Neff

Low-P/E Total Return

Sleep

Scale Economies Shared

Templeton

Global Bargain Hunter

Marks

Risk-Aware Value

Munger

Quality Focus

Ackman

Activist Value

Dreman

Contrarian Value

Piotroski

F-Score

Greenblatt

Magic Formula

Graham

Defensive Value

VerdictNEUTRALFAILPASSFAILPASSNEUTRALFAILNEUTRALNEUTRALFAILNEUTRALNEUTRALPASSNEUTRALNot rankedPASS
Score
Analysis
Intrinsic ValueN/AN/AN/AN/AN/AN/AN/AN/A
Margin of SafetyN/A-91.4%N/A-78.0%-60.3%N/AN/AN/A-92.9%-147.7%N/AN/A-74.4%N/A-166.1%-328.5%
Data As Of10-K (2026-08-25)10-K (2026-08-25)10-K (2026-08-25)10-K (2026-08-25)10-K (2026-08-25)10-K (2026-08-24)10-K (2026-08-24)10-K (2026-08-23)10-K (2026-08-23)10-K (2026-08-23)10-K (2026-08-23)10-K (2026-08-23)10-K (2026-08-23)10-K (2026-08-23)10-K (2026-08-23)10-K (2026-08-23)

Where It Passes

  • Growth75% pass✓ 11✗ 2▾

    6 of 8 pass — Lynch and Sleep object

    Basic earnings-growth PEG (dividends excluded)1.91
    ✗Lynch< 1.0 (ideally < 0.5)
    3-5 Year EPS CAGR12.5%
    ✓Lynch15-30% (Fast Grower); > 0% to pass
    Inventory Growth vs Revenue GrowthN/A (no inventory)
    ✓LynchInventory growth < Revenue growth
    3-5 Year Diluted EPS CAGR12.5% over 5 years
    ✓Neff7%-20% annualized
    Revenue growth vs. gross and operating margin trendgross margin 45.4% -> 46.4%, operating margin 23.9% -> 24.2%
    ✗SleepRevenue rising; gross margin flat or falling; operating margin holding
    5-year Revenue CAGR7.9%
    ✓SleepCAGR > 7%
    5-Year EPS CAGR12.5% CAGR over 5 years
    ✓Templeton> 0% (5-year EPS CAGR)
    Positive Net Income Frequency24/24 years positive
    ✓MarksPositive net income in >= 7 of last 10 years
    3yr Median Revenue Growth6.7%
    ✓Ackman>= 5%
    Positive EPS Growth Frequency5/5 years with positive EPS growth
    ✓AckmanPositive EPS growth in >= 3 of last 5 years
    EPS Growth Direction$1.68 (2002) -> $10.94 (2025)
    ✓DremanPositive over recent years
    EPS CAGR8.5% CAGR over 23 years
    ✓Dreman> 5% annualized
    EPS Growth (3-yr avg, 10-yr window)524.1%
    ✓Graham>= 33% growth

Where It Falls Short

  • Valuation models0% pass✗ 8▾

    ADP overvalued: all 8 models price fair value below $261.80 (median $136.24)

    Lynch fair value$136.79
    ✗Lynch-91.4% margin vs $261.80
    Pabrai fair value$147.11
    ✗Pabrai-78.0% margin vs $261.80
    Akre fair value$163.32
    ✗Akre-60.3% margin vs $261.80
    Templeton fair value$135.69
    ✗Templeton-92.9% margin vs $261.80
    Marks fair value$105.69
    ✗Marks-147.7% margin vs $261.80
    Dreman fair value$150.10
    ✗Dreman-74.4% margin vs $261.80
    Greenblatt fair value$98.38
    ✗Greenblatt-166.1% margin vs $261.80
    Graham fair value$61.09
    ✗Graham-328.5% margin vs $261.80
  • Valuation8% pass✓ 2✗ 24▾

    11 of 12 flag ADP's valuation — Oshaughnessy, Lynch, Pabrai +8 more

    Revenue / market capitalization+0.2116; #3595/5203 (top 69.1%)
    ✗OshaughnessyTop 10% of eligible cross-section
    Net income / market capitalization+4.25%; #1809/6251 (top 28.9%)
    ✗OshaughnessyTop 10% of eligible cross-section
    (Operating cash flow - capex) / market capitalization
    ✗OshaughnessyTop 10% of eligible cross-section
    Trailing six-month price return through the evaluation date+28.85%; #1227/6203 (top 19.8%)
    ✗OshaughnessyTop 10% of eligible cross-section
    Basic earnings-growth PEG (dividends excluded)1.91
    ✗Lynch< 1.0 (ideally < 0.5)
    P/E or FCF YieldP/E=23.9x
    ✗PabraiP/E < 15 or FCF Yield > 10%
    Price / Book Value per Share17.27x
    ✗SchlossP/B <= 0.80x (app cutoff)✗Templeton< 1.5x✗Dreman< 1.2x
    Price / Tangible Book Value per Share95.24x
    ✗SchlossP/TBV <= 1.00x (app cutoff)
    Book Value per Share Change+13.3%
    ✓SchlossLatest BVPS >= earliest BVPS over >= 3 years (app rule)
    Price / Diluted EPS23.9x
    ✗NeffP/E <= 15x (app proxy for a P/E 40%-60% below the market)
    (EPS CAGR % + Dividend Yield %) / P/E0.63
    ✗Neff> 0.7 (Neff's published traditional edge)
    Price / EPS23.9x
    ✗Templeton< 12x (fixed ceiling; proxy for the market's cheapest 40%)✗Dreman< 12x
    Price vs. Trailing Low139% of trailing low ($188.79)
    ✗Templeton<= 120% of trailing low (certified split-adjusted live window)
    P/B or P/E vs. Historical AverageP/E=23.9x, P/B=17.3x
    ✗MarksP/E < 15 or P/B < 2.0
    Discount to Intrinsic Value-74.4% (IV=$150.10 vs Price=$261.80)
    ✗Marks>= 20% below intrinsic value
    Valuation ReasonablenessP/E=23.9x, OE Yield=4.8%
    ✓MungerP/E < 25 or Owner Earnings Yield > 5%
    Price / FCF per Share
    ✗Ackman<= 25
    Price / (CFO / Shares)19.1x
    ✗Dreman< 8x
    EBIT / Enterprise Value5.1%
    ✗Greenblatt> 10%
    Earnings Yield + ROC AssessmentEY=5.1%, ROC=N/A (invested capital <= 0)
    ✗GreenblattBoth EY > 10% and ROC > 25%
    Price / 3-yr avg EPS26.2x
    ✗Graham<= 15x
    Price-to-Book Ratio17.3x
    ✗Graham<= 1.5x
    P/E x P/B451.80
    ✗Graham<= 22.5
  • Cash Flow20% pass✓ 3✗ 9▾

    8 of 10 flag ADP's cash flow — Oshaughnessy, Lynch, Buffett +5 more

    (Operating cash flow - capex) / market capitalization
    ✗OshaughnessyTop 10% of eligible cross-section
    FCF Positive and Growing
    ✗LynchPositive and growing
    Free Cash Flow Proxy
    ✗BuffettPositive and growing
    P/E or FCF YieldP/E=23.9x
    ✗PabraiP/E < 15 or FCF Yield > 10%
    Operating Cash Flow - Capital Expenditures
    ✗Neff> $0 (app proxy for a strong fundamental case)
    Positive Operating Cash Flow frequency17/17 years positive
    ✓SleepPositive OCF in >= 70% of available years
    FCF Positive
    ✗MarksPositive FCF in majority of recent years
    (OCF - CapEx) / Market Cap
    ✗Ackman>= 4%
    Price / FCF per Share
    ✗Ackman<= 25
    Price / (CFO / Shares)19.1x
    ✗Dreman< 8x
    Operating Cash Flow$5.4B
    ✓PiotroskiCFO > 0
    (CFO / Total Assets) vs ROACFO/Assets=8.61%, ROA=6.98%
    ✓PiotroskiCFO/Assets > ROA
  • Debt & Leverage27% pass✓ 4✗ 10▾

    8 of 11 flag ADP's debt & leverage — Lynch, Buffett, Akre +5 more

    Total Debt / Shareholders' Equity0.82x
    ✓SchlossD/E < 1.00x✓Templeton< 1.0 (fixed cap; proxy for below-sector-median leverage)✗Dreman< 0.8
    Total Debt / Equity0.82
    ✗Lynch< 0.33
    Cash - Long-term Debt$-734.0M
    ✗LynchPositive preferred
    Debt/Equity & Interest CoverageD/E: 0.82, IC: 11.6x
    ✗BuffettD/E < 0.5 AND Interest Coverage > 5x
    Debt Levels0.82
    ✗AkreDebt/Equity < 0.3✗MungerDebt/Equity < 0.5
    Current Assets / Current Liabilities1.05x
    ✗SchlossCurrent ratio >= 1.50x (app cutoff)✗Dreman> 1.5
    Interest Coverage & Debt/EBITDAIC=11.6x, D/EBITDA=0.8x
    ✓MarksInterest Coverage > 3x; Debt/EBITDA < 4x
    Total Debt / Shareholders Equity0.82
    ✓Ackman<= 1.0
    LT Debt / Total Assets Change7.45% -> 7.86%
    ✗PiotroskiDecreased YoY
    LT Debt vs Net Current AssetsLT Debt $5.0B vs NCA $2.5B
    ✗GrahamLT Debt <= Net Current Assets
  • Profitability47% pass✓ 20✗ 11▾

    8 of 15 flag ADP's profitability — Oshaughnessy, Lynch, Buffett +5 more

    Net income / market capitalization+4.25%; #1809/6251 (top 28.9%)
    ✗OshaughnessyTop 10% of eligible cross-section
    Basic earnings-growth PEG (dividends excluded)1.91
    ✗Lynch< 1.0 (ideally < 0.5)
    3-5 Year EPS CAGR12.5%
    ✓Lynch15-30% (Fast Grower); > 0% to pass
    ROE73.2%
    ✓Lynch> 15%
    Net Income Positive (10+ years)24/24 years positive
    ✓BuffettPositive every year for 10+ years
    ROE (up to 5-year arithmetic mean)82.1%
    ✓Buffett> 15% arithmetic mean (app rule)
    Operating Margin (10-yr trend)24.2% (latest)
    ✓BuffettStable or rising over 10 years
    Free Cash Flow Proxy
    ✗BuffettPositive and growing
    Earnings Variance (10-yr CoV)0.66
    ✗BuffettCoV < 0.3
    Retained Earnings Effectiveness
    ✗Buffett$1 retained -> > $1 market value created
    Margin of SafetyP/E=23.9x, P/B=17.3x
    ✗PabraiP/B < 1.5 or P/E < 15
    Return on Equity73.9% (3-yr avg)
    ✓AkreROE > 20% (3-year avg)
    Positive Diluted-EPS Years10/10 years positive
    ✓Schloss>= 70% positive over 5-10 observed years (app rule)
    3-5 Year Diluted EPS CAGR12.5% over 5 years
    ✓Neff7%-20% annualized
    Revenue growth vs. gross and operating margin trendgross margin 45.4% -> 46.4%, operating margin 23.9% -> 24.2%
    ✗SleepRevenue rising; gross margin flat or falling; operating margin holding
    5-Year EPS CAGR12.5% CAGR over 5 years
    ✓Templeton> 0% (5-year EPS CAGR)
    Operating Margin Trend23.9% (2023) -> 24.2% (2025)
    ✓TempletonNon-negative operating-margin trend over 3 years
    Discount to Intrinsic Value-74.4% (IV=$150.10 vs Price=$261.80)
    ✗Marks>= 20% below intrinsic value
    Positive Net Income Frequency24/24 years positive
    ✓MarksPositive net income in >= 7 of last 10 years
    Operating Income / Revenue24.2%
    ✓Ackman>= 15%
    Net Income / Shareholders Equity73.2%
    ✓Ackman>= 15%
    Pre-Tax Income / Revenue26.1%
    ✓Dreman>= 8%
    Net Income / Shareholders' Equity73.2%
    ✓Dreman> 12%
    Net Income / Total Assets6.98%
    ✓PiotroskiROA > 0
    ROA Change YoY7.64% -> 6.98% (delta: -0.66%)
    ✗PiotroskiCurrent ROA > Prior ROA
    (CFO / Total Assets) vs ROACFO/Assets=8.61%, ROA=6.98%
    ✓PiotroskiCFO/Assets > ROA
    Gross Margin Change YoY46.0% -> 46.4%
    ✓PiotroskiImproved YoY
    EBIT / Enterprise Value5.1%
    ✗Greenblatt> 10%
    Earnings Yield + ROC AssessmentEY=5.1%, ROC=N/A (invested capital <= 0)
    ✗GreenblattBoth EY > 10% and ROC > 25%
    Positive EPS (10 years)24/24 years positive
    ✓GrahamPositive EPS every year for 10 years
    EPS Growth (3-yr avg, 10-yr window)524.1%
    ✓Graham>= 33% growth
  • Efficiency50% pass✓ 7✗ 4▾

    4 of 8 pass — Dreman, Piotroski, Greenblatt +1 more object

    ROIC (3-5 yr avg)67.1%
    ✓Buffett> 10%
    ROIC - WACC+57.1%
    ✓BuffettPositive (WACC = 10%)
    ROIC (high and growing)FY2023: ROIC=48.0%; FY2024: ROIC=38.5%; FY2025: ROIC=38.2%
    ✓AkreLatest 3 consecutive FYs: ROIC > 15% in each
    Reinvestment Rate x ROIC15.5% (RR=40% x ROIC=38.2%)
    ✓AkreReinvestment Rate * ROIC > 10%
    ROIC (5-year)5/5 years above 12% (latest 38.2%)
    ✓SleepROIC > 12% in a majority of years
    Return on Invested Capital38.2%
    ✓Munger> 15%
    Current Assets / Current Liabilities1.05
    ✗Dreman> 1.5
    Current Ratio Change YoY1.05 -> 1.05
    ✓PiotroskiIncreased YoY
    Revenue / Total Assets Change YoY0.39x -> 0.35x
    ✗PiotroskiImproved YoY
    EBIT / (NWC + Net Fixed Assets)N/A (invested capital <= 0)
    ✗Greenblatt> 25%
    Current Ratio1.05
    ✗Graham>= 2.0
  • Verdicts50% pass✓ 4✗ 4▾

    Split decision: 7 NEUTRAL · 4 FAIL · 4 PASS

    Overall verdict
    •OshaughnessyNEUTRAL (Not ranked)✗LynchFAIL (3/7)✓BuffettPASS (5/9)✗PabraiFAIL (1/3)✓AkrePASS (3/6)•SchlossNEUTRAL (4/7)✗NeffFAIL (3/6)•SleepNEUTRAL (4/6)•TempletonNEUTRAL (5/8)✗MarksFAIL (2/5)•MungerNEUTRAL (3/4)•AckmanNEUTRAL (7/9)✓DremanPASS (5/11)•PiotroskiNEUTRAL (F-Score 6)•GreenblattNot ranked✓GrahamPASS (4/9)

Business & financials

Company Profile

Industry: Business Services
Size: Large Cap($103.7B)
Revenue: $21.9B+6.7% YoY
Net Income: $4.4B+8.2% YoY

Financial Snapshot

Operating Margin24.2%
Return on Equity73.2%
Debt / Equity0.82
Current Ratio1.05
EPS (Diluted)$10.94+9.6% 1y
Buybacks (1y)$2.1B
Buybacks (2y)$3.4B
Shares Retired1.9% / 2.5% 2y

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Shareholder Return

Fiscal 2025

Retired 1.9% of shares last year, 2.5% over two.

Buybacks
$2.1B
Dividends
$2.6B

What drove EPS

A buyback raises earnings per share without the company earning more. This splits each year's change into the two.

FY22
17.3% = 15.7% + 1.4%
FY23
10.8% = 10.0% + 0.8%
FY24
9.7% = 8.7% + 0.9%
FY25
9.6% = 8.2% + 1.3%
Earnings Fewer shares More shares

Share count is the denominator the filer used for diluted EPS, recovered as net income ÷ EPS — not the balance-sheet count, which is a point-in-time figure and would put the timing difference into this split. Years with a loss are omitted: a smaller share count makes a loss per share larger, so the decomposition inverts.

Company Financials

Annual data (10-K) · Last 5 years

MetricFY 2025FY 2024FY 2023FY 2022FY 2021
Market Cap$103.7B$119.2Best.$95.2Best.$86.4Best.$78.2Best.
Revenue$21.9B↑7%$20.6B↑7%$19.2B↑7%$18.0B↑9%$16.5B
Operating Income$5.3B↑7%$5.0B↑8%$4.6B↑8%$4.3B↑14%$3.7B
Net Income$4.4B↑8%$4.1B↑9%$3.8B↑10%$3.4B↑16%$2.9B
EPS (Diluted)$10.94↑10%$9.98↑10%$9.10↑11%$8.21↑17%$7.00
Gross Margin46.4%↑1%46.0%↑1%45.4%↑2%44.7%↑5%42.6%
Operating Margin24.2%↑1%24.1%↑1%23.9%↑1%23.6%↑5%22.6%
ROE73.2%↑11%65.9%↓20%82.5%↓15%97.2%↑6%91.4%
Total Debt$5.0B↑25%$4.0B↑33%$3.0B$3.0B$3.0B
Shareholders' Equity$6.0B↓3%$6.2B↑36%$4.5B↑30%$3.5B↑9%$3.2B
Current Ratio1.051.05↑4%1.01↑2%0.99↓1%0.99
Debt / Equity0.82↑28%0.64↓2%0.66↓23%0.85↓8%0.93
Operating Cash Flow$5.4B↑10%$4.9B↑19%$4.2B↓1%$4.2B↑36%$3.1B
Free Cash Flow----------

Score history

Historical Score Timeline

Industry peers

Industry Peers

Similar companies in Business Services

ADP vs Peers — Financial Grading

Revenue$21.9BTop 25%
Net Income$4.4BTop 25%
ROE73.2%Top 25%
D/E0.82Median
Op. Margin24.2%Top 25%
Curr. Ratio1.05Bottom 25%
CompanyMarket CapPriceRevenueNet IncomeROED/EOp. MarginCurr. RatioGrahamBuffettLynchGreenblattPiotroskiDreman
Mastercard IncMA$514.8B$568.26$32.8B$15.0B193.5%2.4657.6%1.032/95/94/70/3F-Score 83/11
ELECTRONIC ARTS INC.EA$52.9B$209.70$7.5B$887.0M13.1%0.2215.4%1.051/94/93/70/3F-Score 66/11
PAYCHEX INCPAYX$35.4B$99.31$6.5B$1.8B47.1%1.2238.6%1.264/96/94/71/3F-Score 76/11
Rubrik, Inc.RBRK$23.4B$113.80$1.3B$348.8M67.1%—-26.2%1.691/90/90/70/3F-Score 42/11
Grab Holdings LtdGRAB$12.7B$3.10$3.4B$268.0M4.0%0.311.9%1.752/92/92/70/3F-Score 44/11
COMMVAULT SYSTEMS INCCVLT$6.1B$148.08$1.2B$70.7M942.8%—6.3%1.951/92/94/70/3F-Score 65/11
ROBERT HALF INC.RHI$3.8B$36.88$5.4B$133.0M10.4%—1.4%1.534/95/91/70/3F-Score 54/11
CSG SYSTEMS INTERNATIONAL INCCSGS$2.3B$80.04$1.2B$55.9M19.7%1.909.7%1.441/93/94/71/3F-Score 64/11