Automatic data processing (ADP) on the rise on the economic model despite the indebtedness

Automatic Data Processing, Inc. ADP currently benefits from a solid business model, transformation initiatives and acquisitions. Shares of the company have gained 36.8% over the past year, outpacing the 33.1% growth in the industry it belongs to.

Automatic Data Processing, Inc. Price

Automatic Data Processing, Inc. Awards | Automatic Data Processing, Inc. Quote

The company recently reported adjusted earnings per share of $1.65 for the first quarter of fiscal 2022, which beat Zacks’ consensus estimate of 10.7% and was up 17% year on year. on the other. Total revenue of $3.83 billion topped the consensus mark of 1.9% and improved 10% year over year.

How is ADP?

ADP has a strong business model, high recurring revenue, good margins, strong customer retention and low capital expenditures.

ADP has been able to accelerate DataCloud penetration and increase investment in inside sales, mid-market migrations, and service alignment initiatives through its ongoing transformation initiatives. Through these initiatives, the company continues to innovate, improve its operations, increase its margins and strengthen its innovation capabilities.

Strategic Acquisitions like Celergo, WorkMarket, Global Cash Card and The Marcus Buckingham Company have strengthened ADP’s customer base and are helping it expand its operations in international markets. The company continues to seek acquisitions that strategically fit its overall business mix and are easy to integrate over the long term.

ADP’s total debt to total capital ratio of 0.36 at the end of the first quarter of fiscal 2022 was slightly higher than the prior quarter’s ratio of 0.35. An increasing debt ratio indicates that the proportion of debt to finance the company’s assets is increasing, as is the risk of insolvency. In addition, the cash and cash equivalents balance of $1.60 billion at the end of the quarter was below the long-term debt level of $2.98 billion, highlighting that the company does not does not have enough liquidity to meet this debt burden. The company has no short-term debt to repay.

Zacks Ranking and Stocks to Consider

ADP currently carries a Zacks Rank #3 (Hold).

You can see the complete list of Zacks #1 of the day (Strong Buy) shares here.

Some stocks ranked higher overall Business services sector are Budget Reviews CAR, sporting a Zacks Rank #1, and Charles River Associates CRAI and Covenant data Systems ADS, each carrying a Zacks Rank #2 (To buy).

Avis Budget forecasts a profit growth rate of 398.1% for the current year. The company has a four-quarter earnings surprise of 76.9% on average.

Avis Budget shares have jumped 683.2% over the past year. The company is posting long-term earnings growth of 27.5%.

Charles River Associates forecasts a profit growth rate of 61.2% for the current year. The company has a four-quarter earnings surprise of 51%, on average.

Charles River shares have jumped 128.9% over the past year. The company is posting long-term earnings growth of 15.5%.

Alliance Data forecasts a profit growth rate of 93.6% for the current year. The company has a four-quarter earnings surprise of 52.9% on average.

Shares of Alliance Data have jumped 15.3% over the past year. The company has long-term earnings growth of 13.4%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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