Stock Analysis

Should You Investigate Automatic Data Processing, Inc. (NASDAQ:ADP) At US$225?

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NasdaqGS:ADP
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Automatic Data Processing, Inc. (NASDAQ:ADP) saw a decent share price growth in the teens level 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. But what if there is still an opportunity to buy? 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.

See our latest analysis for Automatic Data Processing

Is Automatic Data Processing still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.2% below my intrinsic value, which means if you buy Automatic Data Processing today, you’d be paying a fair price for it. And if you believe the company’s true value is $247.47, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Automatic Data Processing has a low beta, which suggests its share price is less volatile than the wider market.

What does the future of Automatic Data Processing look like?

earnings-and-revenue-growth
NasdaqGS:ADP Earnings and Revenue Growth May 28th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 27% over the next couple of years, the future seems bright for Automatic Data Processing. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? ADP’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on ADP, now may not be the most optimal 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.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

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.

What are the risks and opportunities for Automatic Data Processing?

Automatic Data Processing, Inc. provides cloud-based human capital management solutions worldwide.

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Rewards

  • Earnings are forecast to grow 8.1% per year

  • Earnings grew by 14.7% over the past year

Risks

  • Has a high level of debt

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Automatic Data Processing

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