Is Now An Opportune Moment To Examine Automatic Data Processing, Inc. (NASDAQ:ADP)?

Automatic Data Processing, Inc. (NASDAQ:ADP) received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Automatic Data Processing’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Automatic Data Processing

Is Automatic Data Processing Still Cheap?

According to my valuation model, Automatic Data Processing seems to be fairly priced at around 7.6% below my intrinsic value, which means if you buy Automatic Data Processing today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $279.36, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, Automatic Data Processing’s low beta implies that the stock is less volatile than the wider market.

Can we expect growth from Automatic Data Processing?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Automatic Data Processing's earnings over the next few years are expected to increase by 37%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in ADP’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on ADP, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Automatic Data Processing as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Automatic Data Processing and you'll want to know about it.

If you are no longer interested in Automatic Data Processing, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.