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Commanding a market cap of $100.7 billion, Automatic Data Processing, Inc. (ADP) is a leading provider of cloud-based human capital management (HCM) solutions across payroll, HR, and benefits administration. Based in Roseland, New Jersey, the company operates globally in the software and technology sector through its Employer Services and Professional Employer Organization (PEO) segments.
Companies valued at $10 billion or more are generally considered “large-cap” stocks, and ADP fits this criterion perfectly. ADP stands out in the market for its innovative integration of HCM technology with extensive business outsourcing and analytics services, leveraging over 75 years of expertise to transform HR from a traditional support role into a strategic business driver.
However, the payroll and human resources company dipped 4.8% from its 52-week high of $256.84. ADP stock has dipped marginally over the past three months, and the loss seems a little less pronounced than the S&P 500 Industrial Sector SPDR’s (XLI) dip over the same time frame.
Longer term, ADP is up 4.6% on a YTD basis, lagging behind XLI's 6.8% gains. Moreover, shares of Automatic Data Processing have gained 10.5% over the past 52 weeks, compared to XLI's 16.7% gains over the same time frame.
However, ADP has consistently traded above its 200-day moving average since November last year and remained mostly above its 50-day moving average since December last year, with a few fluctuations, indicating a bullish price trend.
ADP’s underperformance can be attributed to slower-than-expected revenue growth, margin pressures from rising costs, and concerns about the impact of a potential economic downturn on its payroll processing business. Despite this, the stock surged 2.3% on May 1 as the company reported better-than-expected Q3 revenue and earnings, driven by robust demand for its payroll and employee management services.
Nevertheless, ADP’s top rival, Paychex, Inc. (PAYX), is underperforming – not just ADP but the broader equity benchmarks. Shares of Paychex have gained 7.4% over the past 52 weeks and are 2.4% up on a YTD basis.
The analysts are cautious about ADP stock's prospects. The stock has a consensus rating of “Hold” from the 18 analysts covering the stock, and the mean price target of $259.40 represents a premium of just 5.4% to current levels.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
