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Automatic Data Processing, Inc. (ADP) - free report >>
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Automatic Data Processing, Inc. (ADP) - free report >>
Charles River Associates (CRAI) - free report >>
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ADP Shares Gain 20.4% in The Past Year: What's Aiding It?
Shares of Automatic Data Processing, Inc. (ADP - Free Report) have rallied 20.4% in the past year, primarily on a strong business model, high recurring revenues and good margins.
Image Source: Zacks Investment Research
Reasons for Upside
ADP has a solid business model, high recurring revenues, good margins, robust client retention and low capital expenditure. It has a strong cash-generating ability that allows it to pursue growth in areas that exhibit true potential. Total revenues of $4.13 billion improved 10.5% year over year on a reported basis and 12% on an organic constant-currency basis. Adjusted EBIT margin grew 170 basis points to 19.8% in fourth-quarter fiscal 2022.
ADP’s three-tier business strategy helps it maintain and grow its strong position as a human capital management (HCM) technology and services provider. Automatic Data Processing is focused on delivering a complete suite of cloud-based HCM and HR Outsourcing solutions. It is expanding its international HCM and HRO businesses with established local, in-country software solutions and cloud-based multi-country solutions.
Favorable Estimate Revisions
Driven by the above tailwinds, the Zacks Consensus Estimate for current-year earnings has moved 3.6% north to $8.05 in the past 60 days.
Zacks Rank and Other Stocks to Consider
ADP currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investors interested in the broader Zacks Business Services sector can also consider some other top-ranked stocks like Avis Budget Group, Inc. (CAR - Free Report) , Genpact Limited (G - Free Report) and CRA International, Inc. (CRAI - Free Report) .
Avis Budget sports a Zacks Rank #1 at present. CAR has an earnings growth rate of 108.4% for 2022.
Avis Budget delivered a trailing four-quarter earnings surprise of 69.5%, on average.
Genpact carries a Zacks Rank of 2 at present. G has a long-term earnings growth expectation of 12.3%.
Genpact delivered a trailing four-quarter earnings surprise of 10.1%, on average.
CRA International flaunts a Zacks Rank of 1, currently. CRAI has a long-term earnings growth expectation of 14.3%.
CRAI delivered a trailing four-quarter earnings surprise of 26%, on average.