For most investors, how much a stock's price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.
The fear of missing out, or FOMO, also plays a factor in investing, especially with particular tech giants, as well as popular consumer-facing stocks.
What if you'd invested in Automatic Data Processing (
ADP Quick Quote ADP - Free Report) ten years ago? It may not have been easy to hold on to ADP for all that time, but if you did, how much would your investment be worth today? Automatic Data Processing's Business In-Depth
With that in mind, let's take a look at Automatic Data Processing's main business drivers.
Automatic Data Processing, Inc. is one of the leading providers of cloud-based Human Capital Management (HCM) technology solutions - including payroll, talent management, Human Resources and benefits administration, and time and attendance management - to employers around the world. The company delivers it’s global HCM strategy and make investments in highly strategic areas and technology in order to strengthen its underlying business model and prospects for continued growth.
The company was founded in 1949, incorporated in the State of Delaware in June 1961 and completed its initial public offering in September 1961. The company serves more than 740,000 clients across 110 countries and territories.
ADP has two reportable business segments – Employer Services and Professional Employer Organization (PEO) Services.
Employer Services: The Employer Services segment offers a comprehensive suite of HRO and technology-based HCM solutions which includes payroll services, benefits administration, talent management, HR management, time and attendance management, insurance services, retirement services and compliance services. The company mainly serves clients ranging from single-employee small businesses to large enterprises with tens of thousands of employees around the world. In fiscal 2021, revenues from this segment increased 1% year over year on a reported basis and 2% on an organic constant currency basis.
Professional Employer Organization (PEO) Services: The Professional Employer Organization (PEO) Services segment provides small and medium-sized businesses with employment administration outsourcing solutions, including payroll, payroll tax filing, HR guidance, 401(k) plan administration, benefits administration, compliance services, health and workers' compensation coverage, and other supplemental benefits for the employees. Revenues from this segment increased 8% on a year over year basis in fiscal 2021.
ADP’s PEO business, named ADP TotalSource is the largest PEO in the United States based on the number of worksite employees. It serves approximately 12,500 clients and more than 562,000 worksite employees across 50 states and operates as a certified PEO under the United States Internal Revenue Code. Bottom Line
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For Automatic Data Processing, if you bought shares a decade ago, you're likely feeling really good about your investment today.
A $1000 investment made in November 2012 would be worth $4,633.18, or a 363.32% gain, as of November 17, 2022, according to our calculations. Investors should note that this return excludes dividends but includes price increases.
In comparison, the S&P 500 gained 191.11% and the price of gold went up -0.46% over the same time frame.
Going forward, analysts are expecting more upside for ADP.
ADP's shares have outperformed its industry in the past year, partly due to consecutive earnings and revenue beat in the past four quarters. The company continues to enjoy a dominant position in the human capital management market through strategic buyouts like Celergo, WorkMarket, Global Cash Card and The Marcus Buckingham Company. It has a strong business model, high recurring revenues, good margins, robust client retention and low capital expenditure. Further, it continues to innovate, improve operations and invest in its ongoing transformation efforts. On the flip side, ADP faces significant competition in each of its product lines. Failure to remain technologically updated might reduce the demand for its solutions and services. Rising expenses due to investment in transformation efforts remains a concern. High debt remains a concern.
The stock is up 8.74% over the past four weeks, and no earnings estimate has gone lower in the past two months, compared to 10 higher, for fiscal 2022. The consensus estimate has moved up as well.