ADP’s stock price has taken a beating over the past six months, shedding 23.2% of its value and falling to $250.14 per share. This may have investors wondering how to approach the situation.

Following the pullback, is now an opportune time to buy ADP? Find out in our full research report, it’s free for active Edge members.

Why Is ADP a Good Business?

Processing one out of every six paychecks in the United States, ADP (NASDAQ: ADP) provides cloud-based human capital management solutions that help businesses manage payroll, benefits, talent acquisition, and HR administration.

1. Long-Term Revenue Growth Shows Strong Momentum

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, ADP’s 7.5% annualized revenue growth over the last five years was solid. Its growth beat the average business services company and shows its offerings resonate with customers.

2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

ADP has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 20.5% over the last five years.

3. New Investments Bear Fruit as ROIC Jumps

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, ADP’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Final Judgment

These are just a few reasons why we think ADP is a great business. With the recent decline, the stock trades at 22.7× forward P/E (or $250.14 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .

Stocks We Like Even More Than ADP

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