Automatic Data Processing (ADP) Hits A New 52-Week High

Shares of Automatic Data Processing, Inc. (NASDAQ:ADP) touched a new 52-week high of $93.68 in yesterday’s trading session, before closing at $93.50. The human capital management and integrated computing solutions provider has been gaining momentum of late. The company yesterday revealed that private sector jobs in the U.S. have picked up in the month of June. This bodes well for the company.

Automatic Data Processing has returned about 10.4% year-to-date. In comparison, the S&P 500 returned only 2.6% during the same period. This Zacks Rank #2 (Buy) stock has a market cap of approximately $42.6 billion and a long-term expected earnings growth rate of 9.8%. Its stable business, solid free cash flow and high dividend rate, further make it lucrative for investors.

AUTOMATIC DATA Price and Consensus

AUTOMATIC DATA Price and Consensus | AUTOMATIC DATA Quote

The company has been primarily benefiting from continued strength in its PEO services and growth in its newer platforms like RUN, Workforce Now and Vantage. In addition, it has a sizeable market share in the payroll processing business. Apart from the core payroll processing business, ADP is also expected to benefit from new higher-growth services like tax filing, retirement, pre-employment, insurance and others. In addition, the company has been benefiting from an increasing demand for its offerings propelled by the Affordable Care Act (ACA) and some other similar bills.

The company has also been making significant investments in its sales force and product development, which give it an edge amid stiff competition. Its higher revenue per client and lower cost of operations will place it in an advantageous position, going forward.

Nonetheless, investors should watch out for increasing competition from the likes of Paychex (NASDAQ:PAYX), Equifax (NYSE:EFX) , Insperity, Inc. (NYSE:NSP) and TriNet Group, Inc. (NYSE:TNET) , which could weigh on its financials, especially amid a volatile macroeconomic environment.

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