Automatic Data Processing, Inc. (ADP) — Fundamental Analysis & Key Financial Ratios

Kaplio's reading: Automatic Data Processing, Inc.

Updated on October 29, 2026 · accounts published on October 28, 2026

A cash-generative business with a long dividend record and slipping margins

Automatic Data Processing trades at a P/E of 26.0×, 17 % below its ten-year median of 31.2× and 17 % below the median of its sector.

• Is Automatic Data Processing expensive or cheap? Its P/E of 26.0× is 17 % below its ten-year median and has been lower only 11 % of the time in the past decade.
• How is the business doing? EPS grew 10 % over the last 12 months on 7 % revenue growth, but the 18.6 % operating margin trails its 21.7 % long-run average.
• How strong is the balance sheet? Net debt is just 0.2× EBITDA in fiscal 2026, and the dividend has risen for 11 consecutive years on a 60 % payout.
• What to expect from the next earnings? Results are due January 27, 2027, with analysts expecting EPS of $2.92 after eight straight quarterly beats.
• Is it growing with real cash or by diluting shareholders? Free cash flow was 24 % of fiscal 2026 revenue, while stock-based pay was only 1.1 %: growth is not funded by dilution.

Is Automatic Data Processing expensive or cheap?

Over the last 12 months Automatic Data Processing trades at a P/E of 26.0×. Its ten-year median is 31.2× and its decade range runs from 18.8× to 42.6×, so the stock has been cheaper only 11 % of the time over the past ten years. It also sits 17 % below the sector median P/E of 31.5×. EV/EBITDA of 17.9× is just under its five-year average of 18.0×, which makes it neither cheap nor expensive on that measure. A free cash flow yield of 6.2 % supports the earnings multiple. The shares are up 15 % over 12 months and trade 5 % below their 52-week high of $307.94.

How is the business doing?

Over the last 12 months revenue grew 6.7 % and EPS 9.7 %, so profits are rising faster than sales. Profitability has slipped, though. The fiscal 2026 operating margin of 18.6 % is below the 21.7 % average for fiscal 2015-2026. ROE of 76 % looks spectacular, but it rests on a thin equity base, as the P/B of 22.9× shows. Return on capital is less flattering: ROIC over the last 12 months is 5.5 %, 2.7 points below the sector median of 8.1 %. Steady growth with eroding margins is the picture the numbers paint.

How strong is the balance sheet?

In fiscal 2026 net debt was $3.76 per share, equal to 1.3 % of the share price and 0.2× EBITDA, well inside the 1.5× tolerated for software. Over the last 12 months debt/equity is 1.04 and the current ratio is 1.52. The Altman Z of 1.3 falls in the danger zone, which fits poorly with such low net debt, and the Piotroski score is a middling 4 of 9. Shareholders get a 2.3 % dividend yield. The dividend has risen for 11 straight fiscal years, and the 60 % payout of fiscal 2026 earnings leaves room to keep raising it.

What to expect from the next earnings?

On October 28, 2026, Automatic Data Processing reported EPS of $2.82 against $2.77 expected. That 1.8 % beat was its eighth in the last eight quarters. Analysts expect $2.92 for the next quarter, due on January 27, 2027. The fiscal 2027 EPS consensus has held at $12.26 over the last 30 days across 11 analysts, and revenue estimates have barely moved either. Sentiment is lukewarm: of 36 analysts, 8 recommend buying, 23 holding and 5 selling. The flat estimates show that nobody is forecasting a change of pace.

Is it growing with real cash or by diluting shareholders?

In technology, generic ratios fall short. Growth, pricing power and dilution through stock-based pay decide whether a business compounds. Automatic Data Processing passes the cash test: free cash flow was 23.9 % of fiscal 2026 revenue against a healthy bar of 20 %, and stock compensation was 1.1 % of revenue, far below the 10 % ceiling. Growth is the weak spot. Revenue per share rose 8.1 % a year over fiscal 2023-2026, short of the 15 % benchmark, and the Rule of 40 lands at 32, just under the healthy mark of 35. A gross margin of 48.2 % is also far from the 70 % expected of software.

How this was prepared: the data comes from companies' official filings, collected by a professional provider, and from Kaplio's analysis engine (trailing-12-month ratios, 10 years of history and sector medians computed across US-listed companies). The text is written from that data alone, every figure is checked against it before publication, and it is reviewed when the company reports results. This is not investment advice.