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Automatic Data Processing (ADP) Gains But Lags Market: What You Should Know

·3 min read

Automatic Data Processing (ADP) closed the most recent trading day at $241.72, moving +1.5% from the previous trading session. This move lagged the S&P 500's daily gain of 1.83%. At the same time, the Dow added 1.4%, and the tech-heavy Nasdaq gained 0.09%.

Coming into today, shares of the payroll and human resources company had lost 4.67% in the past month. In that same time, the Business Services sector lost 12.17%, while the S&P 500 lost 5.51%.

Wall Street will be looking for positivity from Automatic Data Processing as it approaches its next earnings report date. On that day, Automatic Data Processing is projected to report earnings of $1.80 per share, which would represent year-over-year growth of 9.09%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $4.15 billion, up 8.34% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $8.05 per share and revenue of $17.88 billion, which would represent changes of +14.84% and +8.36%, respectively, from the prior year.

Investors might also notice recent changes to analyst estimates for Automatic Data Processing. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.17% higher. Automatic Data Processing is holding a Zacks Rank of #2 (Buy) right now.

In terms of valuation, Automatic Data Processing is currently trading at a Forward P/E ratio of 29.59. For comparison, its industry has an average Forward P/E of 13.36, which means Automatic Data Processing is trading at a premium to the group.

We can also see that ADP currently has a PEG ratio of 2.47. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Outsourcing was holding an average PEG ratio of 1.39 at yesterday's closing price.

The Outsourcing industry is part of the Business Services sector. This industry currently has a Zacks Industry Rank of 32, which puts it in the top 13% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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