The Pay’s the Thing: Automatic Data Processing, Inc. (ADP)




ADP is a remarkably solid company given that it depends on the country’s employment, and we are still in a period of relatively high unemployment. ADP boasts a client retention rate of over 90%. Market saturation is becoming a limiting factor since so many U.S. businesses already rely on ADP’s services, but the company does not yet have a large overseas presence. The perception of future growth possibilities may have helped ADPs surprising stability as the U.S. slowly climbs out of the recession, but other countries lag behind. In fact, the person responsible for growing ADP’s international revenues, the CFO, will be leaving the company this month; this adds uncertainty to the segment, but also offers new energy for growth. Another part of the company’s growth strategy is through acquisitions, including seven in 2012. With a high level of cash and very low debt, the company expects to keep up this activity during the next few years. While the stock’s price-to-earnings ratio doesn’t look cheap, it is reasonably valued for such a high-quality play carrying a decent dividend.

Corporate Responsibility

ADP proudly touts corporate social responsibility as a core value. In practice, this mostly takes the form of philanthropic activities, including more than 1,500 philanthropic partnerships around the world.. On the environmental side, the company is in the process of improving mileage on its sales vehicles and purchasing hybrid cars. ADP has also improved the footprint of its data centers by reducing 20 such centers down to 2, as well as improving its energy efficiency and its recycling/waste stream.  The firm has recently introduced and promoted paperless checks and W-2s.. The company has been named one of the top 50 workplaces for diversity. The board of directors includes two women.
Revenues: $10.6 Billion
EPS:
2013E $3.20
2012E $2.94
2011A $2.74
Projected Annual Growth Rate: 10%
Dividend: 2.70%
52 Week High-Low: $47.60 – $59.96
Risk: Medium
Website: adp.com