As of June 14, 2025, Automatic Data Processing Inc's estimated intrinsic value ranges from $118.31 to $333.76 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $333.76 | +8.8% |
| Discounted Cash Flow (5Y) | $294.41 | -4.0% |
| Dividend Discount Model (Multi-Stage) | $256.01 | -16.6% |
| Dividend Discount Model (Stable) | $299.15 | -2.5% |
| Earnings Power Value | $118.31 | -61.4% |
Is Automatic Data Processing Inc (ADP) undervalued or overvalued?
With the current market price at $306.82, the stock appears to be fairly valued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Automatic Data Processing Inc's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.42 | 0.66 |
| Cost of equity | 5.8% | 8.6% |
| Cost of debt | 4.6% | 6.3% |
| Tax rate | 22.7% | 22.8% |
| Debt/Equity ratio | 0.02 | 0.02 |
| After-tax WACC | 5.7% | 8.5% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $294 | $120,809M | 84.4% |
| 10-Year Growth | $334 | $136,782M | 70.4% |
| 5-Year EBITDA | $227 | $93,486M | 79.9% |
| 10-Year EBITDA | $269 | $110,499M | 63.3% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $3,378M |
| Discount Rate (WACC) | 8.5% - 5.7% |
| Enterprise Value | $39,839M - $58,814M |
| Net Debt | $1,303M |
| Equity Value | $38,537M - $57,512M |
| Outstanding Shares | 406M |
| Fair Value | $95 - $142 |
| Selected Fair Value | $118.31 |
| Metric | Value |
|---|---|
| Market Capitalization | $124544M |
| Enterprise Value | $125847M |
| Trailing P/E | 31.15 |
| Forward P/E | 29.64 |
| Trailing EV/EBITDA | 12.30 |
| Current Dividend Yield | 188.54% |
| Dividend Growth Rate (5Y) | 10.38% |
| Debt-to-Equity Ratio | 0.02 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $100.13 |
| Discounted Cash Flow (5Y) | 25% | $73.60 |
| Dividend Discount Model (Multi-Stage) | 20% | $51.20 |
| Dividend Discount Model (Stable) | 15% | $44.87 |
| Earnings Power Value | 10% | $11.83 |
| Weighted Average | 100% | $281.64 |
Based on our comprehensive valuation analysis, Automatic Data Processing Inc's weighted average intrinsic value is $281.64, which is approximately 8.2% below the current market price of $306.82.
Key investment considerations:
Given these factors, we believe Automatic Data Processing Inc is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.