A Look At Automatic Data Processing’s Valuation After A Prolonged Share Price Pullback

Automatic Data Processing (ADP) has drawn attention after recent share performance, with the stock down about 24% over the past 3 months and roughly 31% over the past year.

See our latest analysis for Automatic Data Processing.

The recent 1 day share price return of 1.01% decline and 7 day return of 1.97% decline sit within a broader weak patch. The 90 day share price return of 23.79% decline and 1 year total shareholder return of 30.95% decline point to fading momentum, despite a positive 5 year total shareholder return of 16.96%.

If you are reassessing ADP after this pullback, it can be useful to compare it with other established companies by checking out a carefully curated list of 19 top founder-led companies

With the share price under pressure, an intrinsic value gap of about 63% and a roughly 30% discount to analyst targets, the real question is whether ADP is now a mispriced quality name or whether the market is already factoring in its future growth.

Most Popular Narrative: 49.3% Undervalued

According to the most followed narrative on ADP, the fair value sits at $387.77 per share versus the latest close at $196.53, which implies a sizeable valuation gap that rests on specific long term cash flow assumptions.

Based on discounted cash flow modeling, ADP’s intrinsic value of $387.77 per share is linked to assumptions about its underlying fundamentals and cash generation. That valuation depends on successful execution of its AI integration plan and margin normalization over time.

Read the complete narrative.

Want to see what is driving that near 50% gap? The narrative leans heavily on steady revenue gains, firm margins, and a future earnings profile that treats payroll like critical infrastructure rather than commoditized software.

Result: Fair Value of $387.77 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this hinges on execution risk around AI spending, as well as the possibility that competitors or pricing pressure keep ADP closer to a utility than a growth story.

Find out about the key risks to this Automatic Data Processing narrative.

Next Steps

If this mix of optimism and caution has you on the fence, take a closer look at the details and decide quickly where you stand, starting with the 5 key rewards.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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