Automatic Data Processing, Inc. (ADP) Stock Analysis
ADP’s sticky payroll franchise, 92.1% client retention, expanding AI-enabled margins, and enterprise Lyric opportunity support a 5-year $370.69 probability-weighted target, balanced against hiring and valuation risks.
Overview
Automatic Data Processing is a global cloud HCM, payroll, and HR outsourcing provider founded in 1949, serving more than 1.1 million business clients across 140+ countries. Revenue spans recurring subscriptions and processing fees, outsourced PEO services, and interest on client funds; Employer Services contributes about 67% and PEO about 33%. Its breadth across the employee lifecycle, tax compliance in 9,000+ U.S. jurisdictions, global reach, and payroll switching costs underpin 92.1% ES retention and roughly 13-year client tenure. FY26 revenue reached $21.9 billion, up 6.7% reported and 6.0% organic constant currency; adjusted EBIT rose 10% to $5.9 billion and adjusted margin expanded 80 basis points to 26.8%. Adjusted EPS grew 11% to $11.12. **The near-term outlook remains steady rather than explosive:** FY27 revenue growth is guided at 5%–6%, adjusted EPS growth at 9%–11%, and margin expansion at 70–90 basis points. Lyric HCM, with live clients up 94% and its pipeline up 50%, plus ADP Assist adoption and a $40.4 billion float are catalysts. At roughly 21.6x–22.2x FY27 midpoint earnings, valuation is below historical averages but still reflects dependable growth. The five-year probability-weighted target is $370.69 versus a $267 baseline.