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Is Automatic Data Processing Stock Underperforming the S&P 500?

ⓘ This article is third-party content and does not represent the views of this site. We make no guarantees regarding its accuracy or completeness.

Valued at $103.3 billion by market cap, Automatic Data Processing, Inc. (ADP) is one of the world’s leading providers of human-capital management (HCM) services. Headquartered in Roseland, New Jersey, ADP offers cloud-based solutions that streamline payroll, HR, talent and time management, tax/benefits administration, compliance, and related outsourcing services for companies of all sizes.

Companies worth $10 billion or more are generally described as “large-cap stocks,” and ADP perfectly fits that description, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the software - application industry. With over 75 years in the business, ADP serves more than a million clients globally. The company is known for its continuous investment in innovative technology to stay ahead of the competition. Operating in more than 140 countries, ADP has a strong global presence.

 

Despite its notable strength, ADP has fallen 22.6% from its 52-week high of $329.93. Over the past three months, ADP stock declined 16.1%, trailing the S&P 500 Index ($SPX5.3% surge during the same time frame.

www.barchart.com

In the longer term, shares of ADP dropped 12.8% on a YTD basis and 16.8% over the past 52 weeks, outperforming $SPX’s YTD 16.5% gains and 14.2% returns over the last year.

To confirm the bearish trend, ADP has been trading above its 50-day and 200-day moving averages since mid-June, experiencing some fluctuations. 

www.barchart.com

Although Automatic Data Processing delivered stronger-than-expected Q1 results on October 29, its stock still dropped 6.6% in the trading session. Revenue rose 7.1% year over year to $5.2 billion, 95 basis points above consensus. Its adjusted EPS increased 6.9% to $2.49, topping expectations by 2.1%. Yet, a sharp 22.1% year-over-year decline in operating cash flow to $642.3 million appeared to weigh on investor sentiment, contributing to the stock’s slide.

In the competitive arena of the software application industry, Paychex, Inc. (PAYX) has trailed ADP, with a 20.4% downtick on a YTD basis and a 23.4% gain over the past 52 weeks.

Wall Street analysts are cautious on ADP’s prospects. The stock has a consensus “Hold” rating from the 17 analysts covering it. Its mean price target of $294.50 suggests a 15.4% upside potential.


On the date of publication, Kritika Sarmah did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

 

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