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Here's Why You Should Retain ADP Stock in Your Portfolio Now
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Key Takeaways
ADP shares fell 32.1% in a year, underperforming its industry and the S&P 500 index.
ADP expects revenue growth of 6.1% in fiscal 2026 and 5.5% in 2027 with a rising EPS outlook.
ADP benefits from HCM expansion, cloud solutions and steady dividends despite rising competition risks.
Automatic Data Processing, Inc. (ADP - Free Report) stock dipped over the past year. Shares of the company have declined 32.1% compared with a 13.1% dip of the industry it belongs to and the 17.4% rally of the Zacks S&P 500 composite.
1-Year Share Price Performance
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2026 revenues is expected to improve 6.1% year over year, and the same for fiscal 2027 is anticipated to gain 5.5%. The consensus mark for EPS is anticipated to increase 9.5% in fiscal 2026 and 10% in fiscal 2027.
Factors That Augur Well for ADP
ADP capitalizes on the three-tier business strategy to maintain and grow its strong position as a human capital management (HCM) technology and services provider. The company delivers 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.
The company accelerates DataCloud penetration and boosts investment in inside sales, mid-market migrations and service alignment initiatives via transformation initiatives. These initiatives allow the company to continue to innovate, improve operations, expand margins and enhance its ability to innovate.
ADP has a consistent record of making dividend payments. In fiscal 2025, 2024, 2023, 2022 and 2021, the company paid out $2.4 billion, $2.2 billion, $1.9 billion, $1.7 billion and $1.6 billion in dividends, respectively. Such moves indicate the company’s commitment to returning value to shareholders and underscore its confidence in its business. We are expecting steady income growth, which will translate to steady cash flow, enabling ADP to pay out stable dividends.
ADP's current ratio (a measure of liquidity) at the end of the second-quarter fiscal 2026 was 1.03, lower than the industry average of 2.09. However, a current ratio of more than 1 often indicates that the company will be able to easily pay off its short-term obligations.
Risks Faced by Automatic Data Processing
ADP faces significant competition in each of its product lines. Both its Employer Services and PEO Services segments compete with other independent business outsourcing companies in most of their operating regions. The company has observed a few negative impacts on its retention rate, owing to the rising competition and migration from the legacy business.
The outsourcing industry is labor-intensive and heavily dependent on foreign talent. Surging talent costs due to rising competition could deteriorate the industry’s growth, affecting ADP as an eminent industry player.
ADP’s Zacks Rank & Stocks to Consider
Automatic Data Processing carries a Zacks Rank #3 (Hold) at present.
View the Zacks #1 Rank List
Image: Bigstock
Here's Why You Should Retain ADP Stock in Your Portfolio Now
Key Takeaways
Automatic Data Processing, Inc. (ADP - Free Report) stock dipped over the past year. Shares of the company have declined 32.1% compared with a 13.1% dip of the industry it belongs to and the 17.4% rally of the Zacks S&P 500 composite.
1-Year Share Price Performance
The Zacks Consensus Estimate for fiscal 2026 revenues is expected to improve 6.1% year over year, and the same for fiscal 2027 is anticipated to gain 5.5%. The consensus mark for EPS is anticipated to increase 9.5% in fiscal 2026 and 10% in fiscal 2027.
Factors That Augur Well for ADP
ADP capitalizes on the three-tier business strategy to maintain and grow its strong position as a human capital management (HCM) technology and services provider. The company delivers 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.
The company accelerates DataCloud penetration and boosts investment in inside sales, mid-market migrations and service alignment initiatives via transformation initiatives. These initiatives allow the company to continue to innovate, improve operations, expand margins and enhance its ability to innovate.
ADP has a consistent record of making dividend payments. In fiscal 2025, 2024, 2023, 2022 and 2021, the company paid out $2.4 billion, $2.2 billion, $1.9 billion, $1.7 billion and $1.6 billion in dividends, respectively. Such moves indicate the company’s commitment to returning value to shareholders and underscore its confidence in its business. We are expecting steady income growth, which will translate to steady cash flow, enabling ADP to pay out stable dividends.
ADP's current ratio (a measure of liquidity) at the end of the second-quarter fiscal 2026 was 1.03, lower than the industry average of 2.09. However, a current ratio of more than 1 often indicates that the company will be able to easily pay off its short-term obligations.
Risks Faced by Automatic Data Processing
ADP faces significant competition in each of its product lines. Both its Employer Services and PEO Services segments compete with other independent business outsourcing companies in most of their operating regions. The company has observed a few negative impacts on its retention rate, owing to the rising competition and migration from the legacy business.
The outsourcing industry is labor-intensive and heavily dependent on foreign talent. Surging talent costs due to rising competition could deteriorate the industry’s growth, affecting ADP as an eminent industry player.
ADP’s Zacks Rank & Stocks to Consider
Automatic Data Processing carries a Zacks Rank #3 (Hold) at present.
Some better-ranked stocks from the broader Zacks Computer and Technology sector are Cisco Systems (CSCO - Free Report) and Dell Technologies (DELL - Free Report) .
Cisco Systems carries a Zacks Rank of 2 (Buy) at present. It has a long-term (next five years) earnings growth expectation of 7.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CSCO delivered a trailing four-quarter earnings surprise of 2.9%, on average.
Dell Technologies has a Zacks Rank of 2 at present. It has a long-term earnings growth expectation of 20.7%.
DELL delivered a trailing four-quarter earnings surprise of 1.2%, on average.