ADP Stock Fair Value – Wedbush Cuts Automatic Data Processing,’s EPS Estimates for FY2024
November 27, 2023
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Recently, Wedbush lowered their earnings per share (EPS) estimates for Automatic Data Processing ($NASDAQ:ADP), Inc. (ADP) for fiscal year 2024. ADP is a provider of human resource, payroll, tax and benefits administration services, as well as business process outsourcing services. It serves businesses of all sizes and provides solutions to help manage human capital, payments, analytics and compliance. Wedbush’s decision to reduce EPS estimates for ADP is a significant change in sentiment from earlier estimates.
Although the reasons for the revision are unclear, investors are cautious of the potential long-term effects that the lower estimates could have on the company’s stock. ADP’s share price has remained relatively stable in spite of the news, however investors will be monitoring the company’s progress closely over the next few months.
Earnings
Wedbush recently announced a downward revision in their estimates of Automatic Data Processing Inc.’s (ADP) earnings per share (EPS) for FY2024. This decision was based on ADP’s Q1 earning report ending September 30 2021, which showed a total revenue of 3731.2M USD and net income of 700.5M USD, representing a 8.4% and 10.1% decrease respectively. The total revenue of ADP has increased from 3731.2M USD to 4310.7M USD in the last 3 years. Despite this increase, Wedbush has cut its EPS estimates for the company due to the recent decrease in net income.
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for ADP. More…
| Total Revenues | Net Income | Net Margin |
| 17.43k | 3.49k | 20.0% |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for ADP. More…
| Operations | Investing | Financing |
| 3.82k | -1.16k | -1.28k |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for ADP. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 49.32k | 45.85k | 8.43 |
Key Ratios Snapshot
Some of the financial key ratios for ADP are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| 7.5% | 12.0% | 27.6% |
| FCF Margin | ROE | ROA |
| 18.6% | 86.2% | 6.1% |
Market Price
On Friday, Automatic Data Processing, Inc. (ADP) saw its stock open at $231.5 and close at $230.7, down 0.2% from its previous closing price of 231.2. This comes after Wedbush cut its earnings per share (EPS) estimates for the FY2024. The company is now expecting EPS to be much lower than what was initially estimated, with the downward revision assumed to bring significant financial implications for ADP.
This news is not likely to be well received by investors, with the stock already feeling the effects of the EPS adjustment. Going forward, investors will be keeping a close eye on ADP to understand the implications of the EPS cut and how it will affect the stock in the long-term. Live Quote…
Analysis – ADP Stock Fair Value
At GoodWhale, we have conducted an analysis of AUTOMATIC DATA PROCESSING’s financials and our proprietary Valuation Line reveals that the fair value of AUTOMATIC DATA PROCESSING share is around $241.6. Currently, the stock is trading at $230.7, which is a fair price undervalued by 4.5%. This provides an attractive entry point for potential investors looking to buy the stock at good value. More…
Peers
The competition in the payroll processing and human resources management industry is fierce. Automatic Data Processing Inc (ADP) is the largest player in the industry, with a market share of over 26%. Its closest competitors are Paychex Inc, Insperity Inc, and Trucept Inc, which have market shares of around 10%, 7%, and 6%, respectively. While all four companies offer similar services, ADP has a clear advantage in terms of size and scale.
– Paychex Inc ($NASDAQ:PAYX)
Paychex Inc is a human resource consulting and payroll processing company headquartered in Rochester, New York. As of May 2019, Paychex serves over 650,000 small and medium sized businesses. The company has a market cap of $40.17B as of 2022 and a Return on Equity of 38.35%. Paychex was founded in 1971 by B. Thomas Golisano and Robert C.risk.
– Insperity Inc ($NYSE:NSP)
Inspriety Inc is a business services provider located in the United States. The company offers a suite of human resources and business solutions designed to help businesses improve their productivity and bottom line. Inspriety’s services include payroll processing, benefits administration, and talent management. The company serves over 100,000 businesses of all sizes across the United States.
– Trucept Inc ($OTCPK:TREP)
Trucept Inc is a publicly traded company with a market capitalization of 221.15 thousand as of 2022. The company has a return on equity of 42.12%. Trucept Inc is a provider of cloud-based software solutions for small and medium-sized businesses. The company’s software solutions include accounting, human resources, customer relationship management, and e-commerce.
Summary
Wedbush has recently released its fiscal year 2024 earnings estimations for Automatic Data Processing, Inc. (ADP). This analysis projects a slight decrease in the company’s earnings per share (EPS) in comparison to previous estimates. The investment banking firm believes that many of the macroeconomic headwinds that have been present in the past few years will continue to affect ADP’s performance for the fiscal year 2024. Wedbush also believes that the continued competitive pressure from digital technologies and the payroll sector will be factors in the lower EPS estimates.
Despite the lowered EPS estimates, personal consumption expenditure is expected to rebound in the next fiscal year, which could result in higher revenues for ADP. Investing in ADP stock may still present potential upside, as the company is expected to benefit from its competitive advantages and its long-term relationship with its clients.
