Australia markets open in 6 hours 8 minutes
  • ALL ORDS

    6,788.70
    -132.70 (-1.92%)
     
  • AUD/USD

    0.6530
    -0.0115 (-1.73%)
     
  • ASX 200

    6,574.70
    -125.50 (-1.87%)
     
  • OIL

    79.43
    -4.06 (-4.86%)
     
  • GOLD

    1,651.70
    -29.40 (-1.75%)
     
  • BTC-AUD

    28,931.82
    -440.61 (-1.50%)
     
  • CMC Crypto 200

    434.61
    -9.92 (-2.23%)
     

Is Now An Opportune Moment To Examine Automatic Data Processing, Inc. (NASDAQ:ADP)?

·3-min read

Let's talk about the popular Automatic Data Processing, Inc. (NASDAQ:ADP). The company's shares saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an 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 the opportunity still exists.

See our latest analysis for Automatic Data Processing

Is Automatic Data Processing Still Cheap?

According to my valuation model, Automatic Data Processing seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Automatic Data Processing today, you’d be paying a fair price for it. And if you believe that the stock is really worth $277.41, then there’s not much of an upside to gain from mispricing. What's more, Automatic Data Processing’s share price may be more stable over time (relative to the market), as indicated by its low beta.

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 37% 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? ADP’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on ADP, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 1 warning sign for Automatic Data Processing and you'll want to know about it.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here