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5 Reasons to Bet on Automatic Data Processing (ADP) Stock

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A wise investment decision involves buying well-performing stocks at the right time while selling those that are at risk. A rise in share price and strong fundamentals signal a stock’s bullish run.

Automatic Data Processing, Inc. (ADP - Free Report) , an outsourcing company, performed extremely well over the past year and has the potential to carry the momentum forward. Therefore, if you have not taken advantage of the share price appreciation yet, it’s time you add the stock to your portfolio.

What Makes ADP an Attractive Pick?

An Outperformer: A glimpse of the company’s price trend reveals that the stock has had an impressive run on the bourse over the past year. ADP has returned 28.7%, which compared favorably with the industry’s increase of 22.1%.



Northward Estimate Revisions: Over the past 60 days, 10 estimates for 2018 moved north versus no southward revisions, reflecting analysts’ confidence in the company. Over the same period, the Zacks Consensus Estimate for the year increased 4.6%.

Positive Earnings Surprise History: ADP has an impressive earnings surprise history. The company outpaced the consensus mark in three of the trailing four quarters, delivering a positive average earnings surprise of 5.2%.

Solid Growth Prospects: The Zacks Consensus Estimate for 2018 earnings is pegged at $4.30, reflecting year-over-year growth of 16.2%. Moreover, earnings are expected to register 12.1% growth in 2019. The stock has a long-term expected earnings growth rate of 11% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Catalysts: ADP has a strong pipeline for new business bookings and it continues to innovate, improve operations and invest as part of its ongoing transformation efforts. The company has a strong business model, high recurring revenues, good margins, robust client retention and low capital expenditures. Also, the company’s strong cash generation ability allows it to pursue growth in areas that exhibit true potential.

We believe that ADP’s transformation initiatives coupled with a strong business model will help the company to achieve its long-term financial objectives.

Automatic Data Processing, Inc. Revenue (TTM)


Acquisition continues to be a key growth strategy for ADP. Through buyouts, the company has not only gained new customers but has been able to expand its operations in international markets. Some notable acquisitions that ADP made over the past two years include WorkMarket (in January 2018), Global Cash Card (in October 2017) and The Marcus Buckingham Company (in January 2017).

We believe that the company will continue to pursue acquisitions that strategically fit its overall business mix and are easy to integrate over the long term.

Other Stocks to Consider

Some other top-ranked stocks in the broader Business Services sector are Waste Connections, Inc. (WCN - Free Report) , Accenture plc (ACN - Free Report) and NV5 Global (NVEE - Free Report) . All the stocks carry a Zacks Rank #2.   

The long-term expected earnings per share growth rate for Waste Connections, Accenture and NV5 Global is 13.3%, 10% and 20%, respectively.

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