Automatic Data Processing

Methodology

ADP's payroll processing generates highly predictable recurring revenue tied to employment levels and wage inflation, making this calculation quite reliable. The mission-critical nature of payroll creates exceptional stability. This serves as a solid baseline for a defensive business with utility-like earnings, though premiums typically reflect client stickiness.

Methodology

ADP consistently commands premium PEG ratios reflecting extremely high retention rates and predictable modest growth. Recurring revenue, pricing power, and operational leverage justify elevated multiples despite unexciting growth rates. Compare to Paychex and payroll processors to assess whether market leadership warrants the premium.

Methodology

ADP's consistent dividend and multi-decade growth record make yield-adjusted metrics particularly relevant for conservative investors. The cash-generative model and payroll float support both dividends and buybacks. PEGY better captures the total return proposition as a defensive grower with appealing income characteristics.