AUTOMATIC DATA PROCESSING INC (ADP)

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AI: Fair-priced

Price checkThe price looks fair, but it already assumes years of steady growth.

At $272.96, the shares cost 24.9 times fiscal 2026 earnings of $10.94 each. Applying management’s 11%-13% reported earnings-growth outlook gives roughly $12.14-$12.36 for fiscal 2027, or about 22.1-22.5 times expected earnings. Free cash flow—cash left after operations and capital spending—was approximately $5.24 billion, equal to 4.8% of the $108.44 billion market value. That is reasonable for a durable grower, but not cheap; sustained high-single-digit earnings growth is already required.

Big pictureEarnings and cash have risen steadily, though hiring cycles still matter.

From fiscal 2021 through 2026, revenue rose 46%, net income increased 70%, and earnings per share advanced from $6.07 to $10.94. Operating cash flow grew from $3.09 billion to $5.44 billion, while annual capital spending remained below $210 million. This supports durable cash generation. However, payroll volume follows employment: employees processed for existing United States clients grew only 1% in 2026, and management expects 0%-1% in 2027. Co-employment customers grew just 2%, revealing moderate economic sensitivity.

Business strengthThe balance sheet is sound, while generous payouts leave less room for mistakes.

June 2026 cash was $4.23 billion against $4.97 billion of debt, leaving only $735 million of net debt—about 14% of annual operating cash flow. Most reported current assets and liabilities are matched client payroll funds, so they should not be mistaken for ordinary corporate leverage. Dividends of $2.63 billion and repurchases of $2.08 billion consumed about 90% of free cash flow. Shares outstanding still fell 6% since 2021 despite $243 million of 2026 share compensation, but borrowing to repurchase richly valued shares reduces financial flexibility.

What could change the storyStable customer loyalty supports growth, but softer hiring or falling interest income could disappoint.

The strongest upside case is continued pricing, new sales and efficiency: customer retention was 92.1%, while fiscal 2027 guidance calls for 4%-7% bookings growth and 9%-11% adjusted earnings growth. The clearest warning signs would be retention falling more than the guided 0.1-0.3 percentage points or payroll volume contracting. Interest earned from investing client payroll funds contributed $1.31 billion in 2026 and is expected to rise in 2027. Faster rate declines could weaken that benefit, making the current valuation harder to justify.

$272.96 price considered

AI: News

Strong year-end resultsAnnual earnings grew faster than revenue, and management expects another year of solid gains.

On July 29, 2026, the company reported fourth-quarter revenue of $5.47 billion and adjusted earnings of $2.64 per share. Full-year revenue rose 7% to $21.95 billion, while reported earnings per share increased 10%. Fiscal 2027 guidance calls for 5%-6% revenue growth and 9%-11% adjusted earnings growth. Shares gained about 3.5% on release day but fell 4.6% the next day; this timing suggests mixed interpretation, not proven causation.

Debt funds possible buybacksThe company borrowed at five percent partly to support further share purchases.

On May 4, 2026, the company priced $1.0 billion of senior notes paying 5% interest and maturing in 2036. It said proceeds could fund general purposes, including share repurchases. Total debt subsequently rose from $3.98 billion in March to $4.97 billion in June. The borrowing remains manageable beside $5.44 billion of annual operating cash flow, but it adds roughly $50 million of yearly interest and raises the cost of repurchasing shares at elevated prices.

Larger buyback authorizationA new repurchase program can lift each remaining share’s claim on future earnings.

On January 14, 2026, the board authorized $6 billion of share purchases, replacing the previous $5 billion program. The authorization equals about 5.5% of the company’s August market value, although it is permission rather than a commitment. Outstanding shares declined from roughly 403 million in December 2025 to 397.8 million in June 2026. Repurchases therefore increased each remaining share’s ownership, but their value depends on management paying less than the business is ultimately worth.

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Free cash flow

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Total cash / debt

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Financial statements

	2026	2025	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015	2014	2013	2012	2011	2010	2009	2008
Revenue	$21.95B	$20.56B	$19.20B	$18.01B	$16.50B	$15.01B	$14.59B	$14.11B	$13.27B	$12.37B	$11.67B	$10.94B	$10.23B	$9.44B	$10.60B	$9.83B	$8.93B	$8.84B	$8.73B
Research & development	$1.03B	$988.6M	$955.7M	$844.8M	$798.6M	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Operating expenses	$10.24B	$9.62B	$9.05B	$8.66B	$8.25B	$7.52B	$7.40B	$7.08B	$6.85B	$6.39B	$6.03B	$5.63B	$10.00B	$9.31B	$8.66B	$8.03B	$7.17B	$7.05B	$7.10B
Net income	$4.41B	$4.08B	$3.75B	$3.41B	$2.95B	$2.60B	$2.47B	$2.29B	$1.88B	$1.79B	$1.49B	$1.45B	$1.52B	$1.41B	$1.39B	$1.25B	$1.21B	$1.33B	$1.24B
Basic EPSper diluted share	$10.97	$10.02	$9.14	$8.25	$7.04	$6.10	$5.73	$5.27	$4.28	$3.99	$3.27	$3.07	$3.17	$2.91	$2.85	$2.54	$2.42	$2.65	$2.37
Diluted EPSper diluted share	$10.94	$9.98	$9.10	$8.21	$7.00	$6.07	$5.70	$5.24	$4.25	$3.97	$3.25	$3.05	$3.14	$2.89	$2.82	$2.52	$2.40	$2.63	$2.34

Review source filings at SEC.gov ↗

Insider buys & sells

Jul 1, 2024–Jun 30, 2026

Buys1$745.7K disclosed value

Sells (SEC code S)188$172.64M disclosed value

Transaction	Insider	Type	Shares	Price	Value	Owned after
May 8, 2026Form 4 · 10b5-1	Michaud Brian L.Executive VP	SellCommon Stock	848	$212.13	$179.9K	14.5K
May 7, 2026Form 4 · 10b5-1	SWAN ROBERT HOLMESDirector	BuyCommon Stock	3.6K	$206.05	$745.7K	5.1K
Apr 14, 2026Form 4 · 10b5-1	D'Ambrosio ChristopherCorp. VP	SellCommon Stock	543	$195.74	$106.3K	8.4K
Mar 16, 2026Form 4 · 10b5-1	D'Ambrosio ChristopherCorp. VP	SellCommon Stock	543	$208.45	$113.2K	8.9K
Feb 17, 2026Form 4 · 10b5-1	D'Ambrosio ChristopherCorp. VP	SellCommon Stock	543	$212.43	$115.3K	9.5K

Review ownership filings at SEC.gov ↗

AUTOMATIC DATA PROCESSING INC (ADP)

Financial charts

Financial statements

Insider buys & sells