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.
Here's why is ADP an attractive pick
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 23.5%, which compared favorably with the industry’s increase of 7.5%.
ADP has a Zacks Rank #2 (Buy). Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or #2 offer attractive investment opportunities for investors. You can see the complete list of today’s Zacks #1 Rank stocks here.
Northward Estimate Revisions
Over the past 60 days, 10 estimates for fiscal 2019 moved north versus no southward revisions, reflecting analysts’ confidence in the company. Over the same period, the Zacks Consensus Estimate for the year increased 1.9%.
Positive Earnings Surprise History
ADP has an impressive earnings surprise history. The company outpaced the consensus mark in all of the trailing four quarters, delivering a positive average earnings surprise of 7%.
Solid Growth Prospects
The Zacks Consensus Estimate for fiscal 2019 earnings is pegged at $4.27, reflecting year-over-year growth of 21.2%. Moreover, earnings are expected to register 12.7% growth in fiscal 2020. The stock has a long-term expected earnings growth rate of 12.5%.
ADP continues to innovate, improve operations and invest in ongoing transformation efforts. As part of the transformation initiative, the company launched differentiated "Next Gen" platforms to strengthen its position in HCM innovation and improving its U.S. up-market and international product suite. Other notable transformation-related achievements include accelerated DataCloud penetration, higher investment in inside sales, mid-market migrations, service alignment initiatives and voluntary early retirement program.
Automatic Data Processing, Inc. Revenue (TTM)
ADP is expanding ongoing transformation through several broad-based initiatives. These include Go-To-Market initiatives like data-enabled market insights and streamlined support, Service Initiatives encompassing automated service enabler tools and optimized service locations, Product & Portfolio Initiatives including ongoing client upgrades and infrastructure optimization, and Operations & Support Initiatives such as procurement and pay-for-performance programs. Transformation initiatives enable the company to expand margins and improve innovation abilities.
ADP is reinforcing stake in the global human capital management (HCM) market on the back of strategic acquisitions like Celergo, WorkMarket, Global Cash Card and The Marcus Buckingham Company. These buyouts are expected to strengthen the company's customer base and help it expand operations in international markets.
ADP has a strong business model, high recurring revenues, good margins, robust client retention and low capital expenditure. Moreover, it has a strong cash generating ability that allows it to pursue growth in areas that exhibit true potential.
Other Stocks to Consider
A few other top-ranked stocks in the Zacks Business Services sector are WEX Inc (WEX - Free Report) , Total System Services, Inc (TSS - Free Report) and The Interpublic Group of Companies, Inc. (IPG - Free Report) , each carrying a Zacks Rank #2.
The long-term expected EPS (three to five years) growth rate for WEX, Total System Services and Interpublic Group is 15%, 14.2%, and 7.4%, respectively.
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