ADP is another well performing company since the beginning of the year. Last I was analyzing company in January and I found it expensive (read more). Maybe I am too conservative and I want to find cheap companies, while I should buy fairly valued ones… on the other hand my portfolio is performing really well so I do not feel pressure to change anything. Coming back to ADP, how is business going?

Last financial results were good:


We can see that trend of improving results and margin is continued which is supportive for share price performance. Also outlook for 2016 is still good:


Business is really stable, a lot of recurring revenues, but also growing – double digit growth on EPS

Also external environment is still supportive – Businesses added 172,000 net new jobs last month, payroll firm Automatic Data Processing said Thursday, stronger than expected growth that signals a labor market rebound after a surprisingly anemic May. I see no reason in short term for this trend to be changed.

It is all perfect and then comes valuation. With EV/EBITDA = 17 and P/E = 29, dividend yield 2.1% I would never buy shares.


Summing up, awesome business but even higher valuation. Not for me.


Disclosure ADP – no position