ADP Near Crucial Support Level – Buy Signal Ahead
Automatic Data Processing (ADP) should be on your watchlist. Here is why – it is currently trading in the support zone ($286.70 – $316.88), levels from which it has bounced meaningfully before. In the last 10 years, the stock received buying interest at this level 2 times and subsequently went on to generate 10.4% in average peak returns.
| Peak Return | Days to Peak Return | |
|---|---|---|
| 1/15/2025 | 8.6% | 47 |
| 3/12/2025 | 12.2% | 86 |
But is the price action enough alone? It certainly helps if the fundamentals check out. For ADP Read Buy or Sell ADP Stock to see how convincing this buy opportunity might be.
Here are some quick data points:
- Revenue Growth: 6.2% LTM and 6.7% last 3 year average.
- Cash Generation: Nearly 22.3% free cash flow margin and 21.8% operating margin LTM.
- Recent Revenue Shocks: The minnimum annual revenue growth in last 3 years for ADP was 5.7%.
- Valuation: ADP trades at a PE multiple of 31.5
- Opportunity vs S&P: Compared to S&P, you get higher valuation, higher revenue growth, and better margins
Automatic Data Processing provides cloud-based human capital management and HR outsourcing solutions to small and mid-sized businesses through Employer Services and Professional Employer Organization segments.
- Automatic Data Processing Stock Capital Return Hits $28 Bil
- Automatic Data Processing Stock at Support Zone – Bargain or Trap?
- Ten-Year Tally: Automatic Data Processing Stock Delivers $28 Bil Gain
- Paycom Software vs Automatic Data Processing: Which Is the Stronger Buy Today?
- What To Expect From ADP’s Q1 Results?
- What To Expect From ADP’s Q4 Earnings?
| ADP | S&P Median | |
|---|---|---|
| Sector | Industrials | – |
| Industry | Human Resource & Employment Services | – |
| PE Ratio | 31.5 | 23.5 |
|
|
||
| LTM* Revenue Growth | 6.2% | 5.0% |
| 3Y Average Annual Revenue Growth | 6.7% | 5.8% |
| Min Annual Revenue Growth Last 3Y | 5.7% | -0.3% |
|
|
||
| LTM* Operating Margin | 21.8% | 18.8% |
| 3Y Average Operating Margin | 21.6% | 17.7% |
| LTM* Free Cash Flow Margin | 22.3% | 13.2% |
*LTM: Last Twelve Months
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
What Is Stock-Specific Risk If The Market Crashes?
ADP isn’t immune to big drops either. It fell about 36% in both the Dot-Com Bubble and the Global Financial Crisis. The Covid pandemic hit it even harder, with a nearly 40% plunge. Even less severe shocks like the 2018 correction and the recent inflation spike caused declines over 19% and 21%, respectively. So yes, ADP’s strong fundamentals matter, but during major sell-offs, it still takes a hit.
But the risk is not limited to major market crashes. Stocks fall even when markets are in good shape – think events like earnings, business updates, outlook changes. Read ADP Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.