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What Does Automatic Data Processing, Inc.'s (NASDAQ:ADP) Share Price Indicate?

Today we're going to take a look at the well-established Automatic Data Processing, Inc. (NASDAQ:ADP). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$256 at one point, and dropping to the lows of US$210. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Automatic Data Processing's current trading price of US$231 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Automatic Data Processing’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Automatic Data Processing

What's The Opportunity In Automatic Data Processing?

Good news, investors! Automatic Data Processing is still a bargain right now. According to my valuation, the intrinsic value for the stock is $355.20, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Another thing to keep in mind is that Automatic Data Processing’s share price may be quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of Automatic Data Processing look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 27% over the next couple of years, the future seems bright for Automatic Data Processing. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since ADP is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on ADP for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ADP. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

If you'd like to know more about Automatic Data Processing as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Automatic Data Processing and we think they deserve your attention.

If you are no longer interested in Automatic Data Processing, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.