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Automatic Data Processing (ADP) Seems Promising: Here's Why

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Automatic Data Processing, Inc. (ADP - Free Report) performed well in the past year and has the potential to sustain the momentum. If you haven’t taken advantage of its share price appreciation yet, it’s time you add the stock to your portfolio.

Let’s take a look at the factors that make the stock an attractive pick.

An Outperformer: A glimpse at the company’s price trend reveals that its shares have surged 13.7% in the past year compared with 1.4% rise of the industry it belongs to.

Zacks Investment Research
Image Source: Zacks Investment Research

Solid Rank: ADP currently carries a Zacks Rank #2 (Buy). Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2 offer attractive investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northward Estimate Revisions: Ten estimates for fiscal 2023 moved north in the past 60 days versus no southward revision, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for fiscal 2023 earnings has moved up nearly 1% in the past 60 days.

Positive Earnings Surprise History: ADP has an impressive earnings surprise history. It outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an earnings surprise of 3.5%, on average.

Strong Growth Prospects: The Zacks Consensus Estimate for fiscal 2023 earnings is pegged at $8.13 per share, reflecting year-over-year growth of 16%. Moreover, earnings are expected to register 12% growth in fiscal 2024. The company’s long-term expected earnings per share growth rate is at 12%.

Driving Factors:  Strong business model, high recurring revenues, good margins, robust client retention and low capital expenditure act as tailwinds for the company. Strong cash generating ability allows ADP to pursue growth in areas that exhibit true potential.

ADP’s three-tier business strategy helps it to maintain and grow its strong position as a human capital management (HCM) technology and services provider. The company is focused on delivering a complete suite of cloud-based HCM and HR outsourcing (HRO) solutions. It is expanding its international HCM and HRO businesses with established local, in-country software solutions and cloud-based multi-country solutions.

Other Stocks to Consider

Investors interested in the broader Zacks Business Services sector can also consider stocks like Booz Allen Hamilton Holding Corporation (BAH - Free Report) and Cross Country Healthcare, Inc. (CCRN - Free Report) .

Booz Allen carries a Zacks Rank #2 at present. BAH has a long-term earnings growth expectation of 8.9%.

Booz Allen delivered a trailing four-quarter earnings surprise of 8.8%, on average.

Cross Country Healthcare is currently Zacks #2 Ranked. CCRN has a long-term earnings growth expectation of 6%.

CCRN delivered a trailing four-quarter earnings surprise of 10.1%, on average.

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