Staffing & Employment Services · NASDAQ
Current Price
$215.06
Intrinsic Value
Use the calculator below to estimate
Run a full DCF analysis on Automatic Data Processing, Inc. with auto-filled fundamentals, adjustable assumptions, and sensitivity heatmap.
Automatic Data Processing, Inc. provides cloud-based human capital management solutions worldwide. It operates in two segments, Employer Services and Professional Employer Organization (PEO). The Employer Services segment offers strategic, cloud-based platforms, and human resources (HR) outsourcing solutions. Its offerings include payroll, benefits administration, talent management, HR management, workforce management, insurance, retirement, and compliance services, as well as integrated HCM solutions. The PEO Services segment provides HR outsourcing solutions to small and mid-sized businesses through a co-employment model. This segment offers benefits package, protection and compliance, talent engagement, expertise, comprehensive outsourcing, and recruitment process outsourcing services. The company was founded in 1949 and is headquartered in Roseland, New Jersey.
ROIC (TTM)
25.5%
ROE (TTM)
68.7%
FCF Yield
5.95%
The intrinsic value of ADP depends on assumptions about future growth rate, discount rate (WACC), and terminal value. A DCF model discounts projected free cash flows back to present value — small changes in WACC can shift the estimate by 20% or more, which is why sensitivity analysis is essential.
Whether ADP is undervalued depends on comparing the DCF-derived intrinsic value to the current market price of $215.06. A positive margin of safety (intrinsic value above market price) suggests potential undervaluation, but the degree of confidence depends on the reliability of your growth and discount rate assumptions.
To perform a DCF valuation on Automatic Data Processing, Inc.: (1) Start with the trailing free cash flow per share as the base, (2) project future FCF growth over 5-10 years based on Staffing & Employment Services industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting ADP's risk profile, and (4) add a terminal value for cash flows beyond the projection period.
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For Automatic Data Processing, Inc., this means projecting how much free cash flow the Staffing & Employment Services will produce over the next 5-10 years, then discounting those amounts to today's dollars. ADP's ROIC of 25.5% indicates strong capital efficiency, which supports higher growth assumptions in the DCF model.
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For ADP, the capital structure and equity risk premium determine WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%.
