Is it time to consider buying Automatic Data Processing, Inc. (NASDAQ: ADP)?

Today, we’ll take a look at the well-established Automatic Data Processing, Inc. (NASDAQ: ADP). The company’s stock has seen a double-digit share price rise of more than 10% in the past two months on the NASDAQGS. As a large-cap stock with high analyst coverage, you can assume that any recent changes in the company’s outlook are already priced into the stock. But what if there is still an opportunity to buy? Let’s take a closer look at the Automatic Data Processing valuation and outlook to see if there is still a bargain opportunity.

See our latest analysis for automatic data processing

Is automatic data processing always cheap?

The stock currently seems quite valued according to my valuation model. It is trading around 18% below my intrinsic value, which means that if you buy automatic data processing today, you will pay a reasonable price for it. And if you think the real value of the company is $280.48, then there’s not much room for the stock price to rise beyond where it’s currently trading. Additionally, the Automatic Data Processing stock price might be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will automatic data processing generate?

earnings-and-revenue-growth

Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Buying a big company with solid prospects at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Automatic data processing revenues over the next few years are expected to increase by 37%, indicating a very optimistic future. This should lead to more robust cash flow, fueling higher share value.

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 the stock trading around its fair value. However, there are also other important factors that we haven’t considered today, such as the background of its management team. Have these factors changed since the last time you looked at the stock? Will you be confident enough to invest in the business if the price drops below its fair value?

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

If you want to dig deeper into automatic data processing, you should also consider the risks it currently faces. Every business has risks, and we’ve spotted 1 warning sign for automatic data processing you should know.

If you are no longer interested in automatic data processing, you can use our free platform to view our list of over 50 other stocks with high growth potential.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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