Is Automatic Data Processing Inc (ADP) overvalued?
On Equity Rank's model estimate, ADP trades close to its fair value (1% above it). Automatic Data Processing Inc (ADP) last closed at $303.35; the multi-method model fair value is $301.52.
| Price | Model fair value | Price vs model |
|---|---|---|
| $303.35 | $301.52 | 1% above |
What the answer rests on
- 4 of 10 valuation methods put ADP's value above its price and 6 put it below, so the methods disagree.
- To justify today's price, ADP's free cash flow would need to grow about 5.9% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew 13.0% a year.
- ADP trades at 26.9 times its last year's earnings, against a median of 35.7 for 18 profitable Technology companies.
- Over the past year the price sat below the model fair value on 16% of trading days. The gap ranged from 26% below to 15% above the model fair value.
Read this before relying on it
The model fair value is an estimate from published financial statements. It is not a forecast of where the price goes, and it can be wrong. Within 10% either side we call it close to fair value: valuation models are not precise enough to read more into a smaller gap. Our own lists have no proven edge over the market yet; the live record shows every result, misses included.
Every valuation method behind ADP's fair value · What prices assume · Other companies