When Should You Buy Automatic Data Processing, Inc. (NASDAQ:ADP)?
Today we're going to take a look at the well-established Automatic Data Processing, Inc. (NASDAQ:ADP). The company's stock received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Automatic Data Processing’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Automatic Data Processing
What's the opportunity in Automatic Data Processing?
Great news for investors – Automatic Data Processing is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $192.21, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Automatic Data Processing’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Automatic Data Processing generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 5.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Automatic Data Processing, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since ADP is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on ADP for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ADP. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Automatic Data Processing. You can find everything you need to know about Automatic Data Processing in the latest infographic research report. If you are no longer interested in Automatic Data Processing, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.
