How much a stock's price changes over time is important for most investors, since price performance can both impact your investment portfolio and help you compare investment results across sectors and industries.
FOMO, or the fear of missing out, also plays a role in investing, particularly with tech giants and popular consumer-facing stocks.
What if you'd invested in Automatic Data Processing (ADP) ten years ago? It may not have been easy to hold on to ADP for all that time, but if you did, how much would your investment be worth today?
Automatic Data Processing's Business In-Depth
With that in mind, let's take a look at Automatic Data Processing's main business drivers.
Automatic Data Processing, Inc. is one of the leading providers of cloud-based Human Capital Management (HCM) technology solutions - including payroll, talent management, Human Resources and benefits administration, and time and attendance management - to employers around the world. The company delivers it’s global HCM strategy and make investments in highly strategic areas and technology in order to strengthen its underlying business model and prospects for continued growth.
The company was founded in 1949, incorporated in the State of Delaware in June 1961 and completed its initial public offering in September 1961. The company serves more than 740,000 clients across 110 countries and territories.
ADP has two reportable business segments – Employer Services and Professional Employer Organization (PEO) Services.
Employer Services: The Employer Services segment offers a comprehensive suite of HRO and technology-based HCM solutions which includes payroll services, benefits administration, talent management, HR management, time and attendance management, insurance services, retirement services and compliance services. The company mainly serves clients ranging from single-employee small businesses to large enterprises with tens of thousands of employees around the world. In fiscal 2021, revenues from this segment increased 1% year over year on a reported basis and 2% on an organic constant currency basis.
Professional Employer Organization (PEO) Services: The Professional Employer Organization (PEO) Services segment provides small and medium-sized businesses with employment administration outsourcing solutions, including payroll, payroll tax filing, HR guidance, 401(k) plan administration, benefits administration, compliance services, health and workers' compensation coverage, and other supplemental benefits for the employees. Revenues from this segment increased 8% on a year over year basis in fiscal 2021.
ADP’s PEO business, named ADP TotalSource is the largest PEO in the United States based on the number of worksite employees. It serves approximately 12,500 clients and more than 562,000 worksite employees across 50 states and operates as a certified PEO under the United States Internal Revenue Code.
While anyone can invest, building a lucrative investment portfolio takes research, patience, and a little bit of risk. If you had invested in Automatic Data Processing ten years ago, you're probably feeling pretty good about your investment today.
A $1000 investment made in December 2012 would be worth $4,493.05, or a gain of 349.30%, as of December 7, 2022, according to our calculations. This return excludes dividends but includes price appreciation.
Compare this to the S&P 500's rally of 178.74% and gold's return of -0.20% over the same time frame.
Looking ahead, analysts are expecting more upside for ADP.
ADP's shares have outperformed its industry in the past year, partly due to consecutive earnings and revenue beat in the past four quarters. The company continues to enjoy a dominant position in the human capital management market through strategic buyouts like Celergo, WorkMarket, Global Cash Card and The Marcus Buckingham Company. It has a strong business model, high recurring revenues, good margins, robust client retention and low capital expenditure. Further, it continues to innovate, improve operations and invest in its ongoing transformation efforts. On the flip side, ADP faces significant competition in each of its product lines. Failure to remain technologically updated might reduce the demand for its solutions and services. Rising expenses due to investment in transformation efforts remains a concern. High debt remains a concern.
Over the past four weeks, shares have rallied 5.51%, and there have been 10 higher earnings estimate revisions in the past two months for fiscal 2022 compared to none lower. The consensus estimate has moved up as well.
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