Automatic Data Processing, Inc. (ADP) Stock Valuation — PE Analysis
Software - Application · NASDAQ
Current Price
$262.36
PE Ratio (TTM)
23.9x
Intrinsic Value
$306.99
+14.5% margin of safety
COMPETITIVE MOAT
↑Vast Payroll Data Network Effects
ADP's extensive historical payroll data creates a powerful network effect. This data is crucial for developing more accurate HR analytics and predictive models, which are difficult for competitors to replicate.
↑High Customer Switching Costs
Integrating ADP's comprehensive HR and payroll services into a company's operations creates significant switching costs. Migrating complex payroll data and processes to a new provider is time-consuming and risky.
↑Deep Ecosystem Integration
ADP's platform integrates deeply with numerous third-party HR and benefits providers. This broad ecosystem lock-in makes it challenging for clients to move away without disrupting their entire HR infrastructure.
INVESTMENT RISKS
↓Regulatory and Compliance Changes
ADP's business is heavily reliant on navigating complex and ever-changing labor laws and tax regulations. Significant shifts in these regulations could necessitate costly system updates and potentially impact service delivery.
↓Data Security and Privacy Breaches
As a custodian of sensitive employee payroll and personal data, ADP faces substantial risk from cyberattacks and data breaches. A major security incident could severely damage its reputation and lead to significant financial penalties.
↓Economic Downturn Impact on Hiring
While ADP's September hiring report showed an increase, a broader economic downturn could lead to reduced hiring and business closures. This would directly impact ADP's revenue streams tied to employee counts and payroll processing.
Base case
ADP base case PE valuation
At a current price of $262.36, the base case PE valuation puts ADP fair value near $306.99 per share. That figure assumes 9.2% yearly earnings growth, a target PE multiple of 23.74x, and a 10% discount rate.
Intrinsic Value
$306.99
Margin of safety
+14.5%
Expected annual return
+3.2%
Base case assumptions: 9.2% annual earnings growth, 23.74x target PE, 10% discount rate, 5 year projection. Data as of 2026-10-06.
This base case uses default assumptions and is not financial advice. The fair value changes significantly when the target PE or earnings growth rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the ADP PE valuation
Adjust the target PE, earnings growth, and discount rate to see how the fair value and margin of safety for Automatic Data Processing, Inc. respond.
Open PE Calculator for ADPCompany Overview
Automatic Data Processing, Inc. (ADP) is a global provider of cloud-based solutions designed for human capital management (HCM). The company organizes its operations into two primary segments: Employer Services and Professional Employer Organization (PEO). Through its Employer Services division, ADP delivers strategic, cloud-powered platforms and comprehensive human resources (HR) outsourcing. This encompasses a wide array of services such as payroll processing, benefits administration, talent acquisition and management, general HR and workforce management, insurance, retirement planning, and regulatory compliance, often integrated into holistic HCM solutions. Conversely, the Professional Employer Organization (PEO) segment specializes in offering HR outsourcing to small and mid-sized businesses, leveraging a co-employment framework. This segment's offerings span robust benefits packages, regulatory protection and compliance, talent engagement strategies, specialized HR expertise, all-encompassing outsourcing, and even recruitment process outsourcing. Established in 1949, ADP maintains its corporate headquarters in Roseland, New Jersey.
Financial Metrics — ADP PE Stock Valuation Data
PE Ratio (TTM)
23.9x
PEG Ratio
2.49
Earnings Yield
4.21%
ROE (TTM)
70.2%
Revenue/Share (TTM)
$54.95
Dividend Yield
2.59%
Debt/Equity
0.87x
Frequently Asked Questions
What is the PE ratio of ADP?
The trailing twelve-month PE ratio of ADP reflects how much investors pay per dollar of Automatic Data Processing, Inc.'s earnings. This metric is most useful when compared to Software - Application peers and the company's own historical range.
Is ADP overvalued based on PE ratio?
ADP's PE of 23.9x combined with a PEG ratio of 2.49 provides a growth-adjusted perspective. A PEG above 2.0 means the P/E is high relative to the earnings growth rate. Keep in mind that PE-based valuation works best for profitable, mature companies — for high-growth or cyclical Software - Application, a DCF analysis may be more appropriate.
How do I value ADP stock using PE ratio?
To value Automatic Data Processing, Inc. using PE: (1) Compare the current PE (23.9x) against the Software - Application median to assess relative pricing, (2) check the PEG ratio (2.49) to adjust for growth expectations, (3) review the 5-year PE range to identify where the stock sits historically, and (4) estimate fair value by multiplying a target PE by forward EPS estimates. This relative approach complements DCF's absolute valuation.
What is the PEG ratio of ADP?
ADP's PEG ratio is 2.49, calculated by dividing the PE ratio (23.9x) by the expected earnings growth rate. A PEG above 2.0 means the P/E is high relative to the expected earnings growth rate. Note that PEG accuracy depends on the reliability of growth estimates.
Should I use PE ratio or DCF for ADP stock valuation?
PE ratio gives a quick relative read — how ADP is priced versus Software - Application peers. DCF provides an absolute value based on projected free cash flows. For ADP, with a strong ROE of 70.2%, both methods are worth using — PE for a market-relative check, DCF to stress-test whether fundamentals justify the price. Each method has blind spots: PE ignores capital structure and cash flow quality, while DCF is sensitive to growth and discount rate assumptions.
Learn More
- See ADP DCF Valuation → — Intrinsic value via Discounted Cash Flow analysis
- PE Methodology — Step-by-step guide to PE ratio stock valuation
- DCF Methodology — Guide to discounted cash flow analysis
- PE Ratio — Understanding the price-to-earnings ratio
- Intrinsic Value — How to evaluate stock fair value
Related PE Valuations
All Technology valuationsP/E and DCF value ADP with different methods and assumptions, so the two conclusions can differ. Compare the DCF intrinsic value.
Price as of 2026-10-06. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.