Automatic Data Processing, Inc. (ADP) Stock Valuation — PE Analysis
Staffing & Employment Services · NASDAQ
Current Price
$226.21
PE Ratio (TTM)
20.9x
Intrinsic Value
$284.89
+20.6% margin of safety
COMPETITIVE MOAT
↑Dominant Payroll Processing Platform
ADP's extensive client base and deeply integrated payroll and HR systems create significant switching costs for businesses. This entrenched position makes it difficult for competitors to dislodge them.
↑Brand Recognition and Trust
ADP is a household name in payroll and HR services, fostering strong brand recognition and trust among businesses of all sizes. This reputation is a significant barrier to entry for newer players.
↑Data Network Effects
The vast amount of anonymized payroll and employment data ADP collects provides valuable insights for its clients and enhances its product development. This data advantage is difficult for rivals to replicate.
INVESTMENT RISKS
↓Intensifying Competition
While ADP has a strong moat, the HR tech landscape is increasingly competitive with nimble startups and established players offering integrated solutions. This could pressure pricing and market share.
↓Technological Disruption
Emerging technologies in AI and automation could disrupt traditional payroll processing models. ADP must continuously innovate to maintain its technological edge and avoid obsolescence.
↓Regulatory and Compliance Changes
Changes in labor laws, tax regulations, and data privacy requirements can necessitate significant system updates and compliance efforts. Failure to adapt quickly could lead to penalties and client dissatisfaction.
Base case
ADP base case PE valuation
A base case PE valuation for ADP estimates a fair value of about $284.89 per share, against a current price of $226.21. The model assumes 10.3% annual earnings growth, a 21x target PE multiple, and a 10% discount rate.
Intrinsic Value
$284.89
Margin of safety
+20.6%
Expected annual return
+4.7%
Base case assumptions: 10.3% annual earnings growth, 21x target PE, 10% discount rate, 5 year projection. Data as of 2026-06-12.
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)
20.9x
PEG Ratio
2.13
Earnings Yield
4.79%
ROE (TTM)
68.7%
Revenue/Share (TTM)
$53.85
Dividend Yield
2.94%
Debt/Equity
0.63x
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 Staffing & Employment Services peers and the company's own historical range.
Is ADP overvalued based on PE ratio?
ADP's PE of 20.9x combined with a PEG ratio of 2.13 provides a growth-adjusted perspective. A PEG above 2.0 suggests ADP may be richly valued even accounting for growth. Keep in mind that PE-based valuation works best for profitable, mature companies — for high-growth or cyclical Staffing & Employment Services, 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 (20.9x) against the Staffing & Employment Services median to assess relative pricing, (2) check the PEG ratio (2.13) 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 2.13, calculated by dividing the PE ratio (20.9x) by the expected earnings growth rate. A PEG above 2.0 often signals the stock is priced aggressively relative to its growth trajectory. 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 Staffing & Employment Services peers. DCF provides an absolute value based on projected free cash flows. For ADP, with a strong ROE of 68.7%, 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 Industrials 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 2026-06-12. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.