Automatic Data Processing, Inc. (ADP) Stock Valuation — PE Analysis
Software - Application · NASDAQ
Current Price
$273.37
PE Ratio (TTM)
24.9x
Intrinsic Value
$324.36
+15.7% margin of safety
COMPETITIVE MOAT
↑Deep customer relationships and switching costs
ADP's comprehensive suite of HR and payroll services creates significant switching costs for its large and diverse client base. This lock-in effect is reinforced by deep integration into client operations.
↑Scale and data network effects
ADP's vast processing volume generates valuable data insights on labor markets. This scale allows for continuous improvement of its offerings and creates a competitive advantage through network effects.
↑Brand reputation and trust
As a long-standing leader in payroll and HR solutions, ADP has built a strong reputation for reliability and expertise. This trust is crucial for businesses entrusting sensitive employee data.
INVESTMENT RISKS
↓Regulatory and compliance complexity
Changes in labor laws and tax regulations require constant adaptation. Failure to maintain compliance across all jurisdictions could lead to significant penalties and reputational damage.
↓Cybersecurity threats and data breaches
Handling sensitive employee and financial data makes ADP a prime target for cyberattacks. A major breach could severely damage customer trust and lead to substantial financial liabilities.
↓Dependence on economic cycles
ADP's revenue is tied to employment levels and business spending. Economic downturns can lead to reduced hiring, business closures, and decreased demand for its services.
Base case
ADP base case PE valuation
At a current price of $273.37, the base case PE valuation puts ADP fair value near $324.36 per share. That figure assumes 9.5% yearly earnings growth, a target PE multiple of 25x, and a 10% discount rate.
Intrinsic Value
$324.36
Margin of safety
+15.7%
Expected annual return
+3.5%
Base case assumptions: 9.5% annual earnings growth, 25x target PE, 10% discount rate, 5 year projection. Data as of 2026-07-29.
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)
24.9x
PEG Ratio
2.60
Earnings Yield
4.04%
ROE (TTM)
70.2%
Revenue/Share (TTM)
$54.95
Dividend Yield
2.43%
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 24.9x combined with a PEG ratio of 2.60 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 (24.9x) against the Software - Application median to assess relative pricing, (2) check the PEG ratio (2.60) 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 2.60, calculated by dividing the PE ratio (24.9x) 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 2026-07-29. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.