We find Automatic Data Processing to be very undervalued versus Paycom Software. Here are the factors we considered:
P/S Ratio
ADP's P/S multiple of 4.8x is
significantly lower than the figure of 29.8x for PAYC
Revenue Growth
Over the last twelve months, Automatic Data Processing has seen revenues change by 1.9% -
meaningfully lower than the figure of 21.4% for Paycom SoftwareIn the twelve-month period before that, revenues for Automatic Data Processing had changed by 5.8% -
much lower than the 31.1% change for Paycom Software
Operating Margin
Automatic Data Processing's operating margin was 22.6% for the most recent twelve-month period, which is
lower than Paycom Software's operating margin of 28.6%Over the last twelve months, the operating margin for Automatic Data Processing changed by 0 pp (percentage points) -
better than the change of -1.3 pp for Paycom SoftwareIn the twelve-month period before that, the operating margin for Automatic Data Processing had changed by 4.3 pp -
notably better than the change of -0.7 pp for Paycom Software over the same period
Note: ADP reports its results on a fiscal year ending 6/30
Automatic Data Processing Paycom Software Valuation: Current Market Cap $70 Bil $24 Bil Current P/S Multiple 4.8x 29.8xAutomatic Data Processing significantly lower Revenues: Total Revenue (LTM) $15 Bil $792 Mil LTM Revenue Growth (Current) 1.9% 21%Automatic Data Processing meaningfully lower LTM Revenue Growth (Year-ago) 5.8% 31%Automatic Data Processing much lower Operating Income/Margin: Operating Income (LTM) $3.3 Bil $227 Mil Operating Margin (LTM) 23% 29%Automatic Data Processing lower LTM Margin Change (Current) 0 pp -1.3 ppSimilar for both companies LTM Margin Change (Year-ago) 4.3 pp -0.7 ppAutomatic Data Processing notably better