Automatic Data Processing, Inc. ADP
ADP remains a high-quality compounder — FY2026 (ended 2026-06-30) revenue grew 6.7% to $21.95B with EPS of $10.95 (+9.7% YoY) and free cash flow of $5.24B at a 23.9% FCF margin — but the operating margin compressed sharply from 26.3% to 18.6% year-over-year, a ~780bp decline that tempers the headline growth despite net income still rising 8.2% (aided by debt reduction from $9.07B to $5.27B). The stock has rallied to $283.01, roughly 13% above its 50-day MA of $250.63 with an RSI of 67, and trades at a P/E of 25.8 — only a 5.9% premium to the peer median of 24.4, but technically extended after a 13.4% monthly surge.
Smart-money conviction has improved to 0.0616 from negative readings in late 2025, yet remains well below the 0.1236 peak from Q3 2024, and insiders remain net sellers at $83.4M over 24 months. The risk/reward at current levels is balanced: quality fundamentals and improving institutional flows are offset by margin compression signals and an overextended tape.
What could go wrong
- Operating margin compression. Operating margin fell from 26.3% in FY2025 to 18.6% in FY2026 (ended 2026-06-30), with operating income declining from $5.41B to $4.08B despite revenue growth — if structural rather than one-time, this erodes the compounding thesis.
- Technical overextension. At $283.01 the stock trades 13% above its 50-day MA ($250.63) and 20% above its 200-day MA ($235.74) with an RSI of 67, increasing vulnerability to a mean-reversion pullback.
- Weak labor market backdrop. ADP's own National Employment Report (August 2026) showed only 9,500 private-sector jobs added per week, potentially pressuring new client acquisition in the core payroll business.
- Insider selling persists. Over 24 months, insiders executed 135 dispositions versus 71 acquisitions with net value of -$83.4M, and recent activity shows option exercises followed by sales at ~$280, not open-market buying.
What would change my mind
Where this comes from: FMP fundamentals FY2026 (period ended 2026-06-30); derived_metrics · derived_metrics FY2025 vs FY2026; FMP fundamentals · FMP fundamentals FY2026 vs FY2025; derived_metrics · technicals as of 2026-08-24; peer_relative. Orin's read on ADP; not advice.
Twelve months actual closes to 2026-09-23 · actual filings
50-day average 200-day average · volume below
On file
All ADP filingsLargest holders · 13F Q2 2026
Money flow| Filer | Position | Of fund |
|---|---|---|
| Vanguard Capital Management | $5.8B | 0.1% of fund |
| State Street | $4.6B | 0.1% of fund |
| Invesco | $3.0B | 0.2% of fund |
| Charles Schwab Investment Management | $2.9B | 0.4% of fund |
| Geode Capital Management | $2.7B | 0.1% of fund |
| Vanguard Portfolio Management | $2.4B | 0.1% of fund |
131 filers · quarter ended Q2 2026 · positions, not flows
Insiders, last 24 months: 253 Form 4 filings, net −$118.4M. Of the 50 on hand, 0 were open-market purchases and 19 sales— the rest are grants, option exercises and tax withholding.
Ask Orin about ADP
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Start 3 free days →Where it trades
| Metric | Now | Own median | Sector |
|---|---|---|---|
| P/E | 24.0× | 29.8× | 44.5× |
| EV/EBITDA | 16.8× | 20.4× | — |
| P/S | 4.80× | 5.33× | — |
| P/B | 17.5× | 21.3× | — |
Its P/E sits below all 5 of the last 5 years (−2.00σ from its own mean).
7.8%
free-cash-flow growth every year for 10 years, discounted at 10%, is what today’s price implies — starting from $5.2B of trailing free cash flow. It is an assumption the market is making, not a forecast Orin is making.
What Wall Street published
$268
$225 – $310 · +1% against today's price
- 8 buy or overweight
- 23 hold
- 5 underweight or sell
The analysts’ consensus and their own ratings, not Orin’s. A target is a twelve-month opinion published by the firm that wrote it.
Against the companies it is compared to
| Company | Market cap | P/E | EV/EBITDA | Gross | Net | ROE |
|---|---|---|---|---|---|---|
| ADPAutomatic Data Processing, Inc. | $105B | 24.0× | 16.8× | 48.2% | 20.1% | 70% |
| DEDeere & Company | $192B | 39.3× | 22.2× | 35.7% | 10.2% | 18% |
| GDGeneral Dynamics Corporation | $93B | 20.6× | 15.2× | 15.4% | 8.2% | 17% |
| HONHoneywell International Inc. | $67B | 8.2× | 7.4× | 36.6% | 22.7% | 42% |
| LMTLockheed Martin Corporation | $121B | 19.3× | 14.0× | 11.8% | 8.2% | 86% |
| MMM3M Company | $88B | 30.1× | 17.9× | 39.4% | 11.9% | 77% |
| NOCNorthrop Grumman Corporation | $73B | 16.3× | 11.7× | 20.1% | 10.5% | 27% |
| PAYXPaychex, Inc. | $37B | 20.7× | 12.4× | 74.4% | 27.4% | 47% |
| PHParker-Hannifin Corporation | $122B | 33.6× | 22.5× | 37.7% | 17.0% | 25% |
| TTTrane Technologies plc | $96B | 33.0× | 22.9× | 35.4% | 13.3% | 34% |
| UPSUnited Parcel Service, Inc. | $81B | 17.8× | 9.9× | 16.6% | 5.1% | 29% |
The median is of the 10 peers listed above and nothing else — check it against the column. This company trades 16.3% above it. The peer set is the vendor’s, so a company can appear here that a person would not have chosen.
What it has traded at
What its sector has traded at
Two scales, drawn separately on purpose: a sector median and one company’s multiple are not the same number and putting them on one axis invites a comparison neither series supports.
Discounted cash flow
| Model | Fair value | Against | Computed |
|---|---|---|---|
| Standard DCF | $349 | $231.96 · +51% | 2026-06-10 |
| Levered DCF | $345 | $231.96 · +49% | 2026-06-10 |
The vendor’s intrinsic-value models. Treat them as a low-growth anchor — for a fast grower the market routinely pays well above a DCF. These were computed against the price in the “against” column, not today’s.
Every estimate on one scale
The vertical rule is the current price. Ranges and point estimates are the backend’s, published as they were calculated; an arrow means the estimate sits beyond this scale, and its number is on the right.