As of September 16, 2026
1. Company Overview
Automatic Data Processing, Inc. (ADP) is a global provider of cloud-based human capital management (HCM) software, payroll processing, benefits administration, HR outsourcing, and workforce analytics across business enterprises of all sizes.
- Employer Services (ES): Core global HCM ecosystem offering payroll, workforce management, talent acquisition, HR compliance, tax administration, and software solutions (including ADP Workforce Now and ADP Vantage HCM).
- PEO Services (ADP TotalSource): Professional Employer Organization model delivering co-employment solutions, comprehensive health benefit plan administration, workers’ compensation coverage, and compliance services to small and mid-sized enterprises.
- Client Funds Interest (The Float): Optimization of yield earned on high-volume client funds held in transit prior to payroll and tax disbursements.
Exchange: NASDAQ | Sector: Technology / Industrials | Industry: Human Support Services / HR Software & Services
Headquarters: Roseland, NJ | CEO: Maria Black
2. Key Stock & Valuation Snapshot
| Metric | Value | Reference / Context |
| Stock Price | $273.19 | 52-Week Range: $188.16 – $294.46 |
| Market Capitalization | $108.53 Billion | Large-cap HCM software and payroll market leader |
| Trailing P/E (TTM) | 24.96x | In line with 10-year historical valuation ranges (~25.0x) |
| Price / Book (P/B) | 22.5x | Skewed high due to ongoing share repurchase programs and high capital efficiency |
| Diluted EPS (Q4 FY26) | $2.45 GAAP (+10% YoY) | $2.64 Non-GAAP (+17% YoY); Full-Year FY26 Adjusted EPS: $11.12 (+11% YoY) |
| Dividend Yield (Forward) | 2.05% | Annualized Dividend: $5.60/share ($1.40 quarterly) |
3. Financial Performance (Q4 & Full-Year FY2026 Summary)
Reported on July 29, 2026, ADP delivered solid financial results for the fiscal year ended June 30, 2026, driven by high retention rate stability and expanding client fund float yields.
- Total Operating Revenue: $5.47 Billion in Q4 FY26 (+7% YoY); Full-Year FY26 Revenue: $21.95 Billion (+7% YoY; +6% organic constant currency).
- Net Annual Profit: $4.41 Billion GAAP net income in FY26 (+8% YoY); Adjusted EBIT reached $5.88 Billion (+10% YoY).
- Adjusted EBIT Margin: 26.8% for FY26 (+80 bps YoY); Q4 FY26 Adjusted EBIT margin reached 25.1% (+140 bps YoY).
- Operating Cash Flow: $5.44 Billion (+10% YoY), generating robust free cash flow through asset-light recurring software and service models.
- Segment Breakdown: Employer Services $14.83 Billion (+7% YoY, margin 36.7%); PEO Services $7.13 Billion (+7% YoY).
4. Quality Metrics Dashboard
| Metric Category | ADP Performance | Target Benchmark | Pass / Fail Status |
| EPS Growth Next 3 Years | ~10.0% Annualized | > 7.0% | PASS |
| EPS Growth Next Year | ~10.0% (FY27 Guidance: 9–11%) | > 7.0% | PASS |
| ROCE | 48.5% | > 20.0% | PASS |
| ROE (TTM) | ~72.0% | > 10.0% | PASS (Exceptional equity return profile) |
| 5-Year Average ROE | > 65.0% | > 10.0% | PASS |
| ROIC (TTM) | ~38.5% | > 15.0% | PASS (High economic moat) |
| 5-Year Average ROIC | 35.2% | > 15.0% | PASS |
| TTM Net Profit Margin | 20.1% | > 10.0% | PASS |
| 5-Year Net Profit Margin | 19.4% | > 10.0% | PASS |
| TTM Gross Margin | 48.7% | > 40.0% | PASS |
| 5-Year Gross Margin | 46.5% | > 40.0% | PASS |
| TTM Free Cash Flow Margin | 21.8% | > 10.0% | PASS |
| 5-Year Free Cash Flow Margin | 21.0% | > 10.0% | PASS |
| FCF Conversion Ratio | 108.2% | > 80.0% | PASS |
| CAPEX to Revenue (TTM) | ~3.0% (includes capitalized software) | Asset-Light Target | PASS |
| 5-Year CAPEX to Revenue | ~3.1% | Asset-Light Target | PASS |
| TTM Revenue Growth | 7.0% (6.0% organic CC) | > 5.0% | PASS |
| 5-Year Revenue Growth | 7.8% CAGR | > 5.0% | PASS |
| TTM EPS Growth | 10.0% GAAP (11.0% Non-GAAP) | > 7.0% | PASS |
| Last 5 Year EPS Growth | 11.2% CAGR | > 7.0% | PASS |
| Sloan Ratio | +1.8% | -10.0% to +10.0% | PASS (High earnings quality) |
| Debt to Equity | Elevated (Driven by low equity base) | Conservative Leverage | PASS (Managed via operational cash flow) |
| Net Corporate Debt to EBITDA | ~0.15x (Excludes client funds obligation) | < 3.0x | PASS (Near cash-neutral balance sheet) |
5. Growth Catalysts
- Global HCM Modernization: Migration of enterprise clients to Next-Gen HCM platforms, driving higher average revenue per user (ARPU) through integrated module additions (talent, analytics, and time-tracking).
- Client Funds Interest Expansion: Elevating portfolio yields on ~$40.4 Billion average client fund balances, contributing over $1.35 Billion in high-margin pre-tax revenue.
- GenAI & Workforce Automation: Deep integration of proprietary generative AI tools (ADP Assist) into HCM platforms to automate payroll workflows, HR service tickets, and compliance reporting.
6. Dividend & Capital Return Profile
- Quarterly Dividend: $1.40 per share ($5.60 annualized).
- Dividend Track Record:Dividend Aristocrat with 51 consecutive years of dividend increases.
- Payout Ratio: ~50% of Adjusted EPS, preserving capital for share repurchases and balance sheet flexibility.
- Share Repurchases: Consistent buyback execution, returning $2.08 Billion in stock repurchases during FY26 (reducing net share count by ~1.9%). Total capital returned to shareholders exceeded $4.7 Billion in FY26.
7. Historical Stock Returns
| Time Horizon | ADP Total Return | Benchmark / Context |
| 1-Month | -4.54% | Pullback alongside broader payroll and enterprise software group |
| YTD (2026) | +12.44% | Steady accumulation following strong earnings execution |
| 1-Year | -4.68% | Market consolidation following interest rate adjustments |
| 3-Year Return | ~23.8% (Cumulative) | Stable dividend-backed compound returns |
| 5-Year CAGR | ~8.1% (Annualized) | Consistent wealth accumulation matching corporate earnings growth |
8. SWOT Analysis
Strengths
- Unrivaled enterprise switching costs and high customer retention (92.1% revenue retention in FY26).
- Massive float balances ($40B+) generating high-margin interest income during elevated rate environments.
- 51-year Dividend Aristocrat status backed by consistent cash conversion and recurring revenues.
Weaknesses
- Exposure to underlying macroeconomic cycles and labor market slowdowns (measured via pays per control).
- PEO segment margin pressure from rising health benefit pass-through expenditures.
Opportunities
- Expanding international payroll and employer of record (EOR) footprints across global enterprise clients.
- Further deployment of AI-driven HR analytics to cross-sell value-added compliance modules.
Threats
- Potential central bank interest rate cuts eroding client fund interest income.
- Tech-focused disruptors (e.g., Paylocity, Rippling, Gusto) targeting SMB payroll market share.
9. Investment Thesis
- Core Case: Automatic Data Processing remains the gold standard in human capital management, combining high enterprise switching costs with strong capital returns (38%+ ROIC). Supported by stable client retention (92.1%), robust FY26 revenue ($21.95B), and over 50 years of continuous dividend growth, ADP represents a premier defensive compounder capable of navigating varying economic cycles through recurring SaaS revenues and float income optimization.
10. Dividend Stockpile Score
