ADP revenue grows 6.77%, outpacing professional services peers
- Revenue grew 6.77%, exceeding the 1.95% industry average
- Return on equity of 15.81% surpasses the 8.79% sector benchmark
- EBITDA of $1.53 billion is 12.75x the industry average
- P/E ratio of 24.05 is 0.77x lower than the peer group average
*this image is generated using AI for illustrative purposes only.
Automatic Data Processing (NASDAQ: ADP) reported 6.77% revenue growth, surpassing the 1.95% average of its professional services competitors. The payroll and human capital management provider also delivered a 15.81% return on equity, well above the 8.79% industry benchmark.
ADP serves over 1.1 million clients and manages payroll for more than 42 million workers across 140 countries as of fiscal 2026. The company’s financial metrics indicate robust operational performance relative to peers like Paychex and Paycom.
Financial metrics against industry average
The following table compares ADP’s key valuation and profitability ratios against the average of fourteen professional services companies.
| Metric | Automatic Data Processing | Industry Average | Difference |
|---|---|---|---|
| Price to Earnings (P/E) | 24.05 | 31.11 | Lower |
| Price to Book (P/B) | 17.33 | 6.22 | Higher |
| Price to Sales (P/S) | 4.83 | 1.85 | Higher |
| Return on Equity (ROE) | 15.81% | 8.79% | Higher |
| EBITDA | $1.53 billion | $0.12 billion | Higher |
| Gross Profit | $2.51 billion | $0.36 billion | Higher |
| Revenue Growth | 6.77% | 1.95% | Higher |
Valuation and profitability analysis
ADP trades at a P/E ratio of 24.05, which is 0.77x lower than the industry average of 31.11. However, the company commands a premium on book value with a P/B ratio of 17.33, exceeding the industry mean of 6.22 by 2.79x. The Price to Sales ratio of 4.83 is also 2.61x higher than the sector average of 1.85.
Despite higher valuation multiples on assets and sales, ADP demonstrates superior efficiency. Its ROE of 15.81% exceeds the peer average by 7.02 percentage points. Absolute profitability figures are also substantial: EBITDA stands at $1.53 billion, which is 12.75x the industry average of $0.12 billion. Gross profit reaches $2.51 billion, representing 6.97x the sector average of $0.36 billion.
Debt to equity positioning
ADP maintains a debt-to-equity ratio of 0.87. This figure indicates a stronger financial position compared to its top four peers, suggesting a favorable balance between debt and equity financing. The lower leverage profile supports the company’s stability within the competitive landscape.
What the numbers show
A divergence exists between ADP’s earnings-based valuation and its asset-based multiples. While the P/E ratio suggests potential undervaluation relative to the industry, the P/B and P/S ratios indicate that the market assigns a significant premium to ADP’s asset base and sales volume. This combination implies that investors are pricing in high-quality earnings generation, evidenced by the 15.81% ROE, rather than just current book value or sales levels.
Peer comparison highlights
Among key competitors, Paychex Inc recorded 1.56% revenue growth but a lower ROE of 11.55%. Paycom Software Inc showed 9.84% revenue growth with an ROE of 15.53%, closely tracking ADP’s efficiency. In contrast, Robert Half Inc reported negative revenue growth of -2.44% and a negative EBITDA of -$0.04 billion. First Advantage Corp led the group in revenue growth at 14.88% but operated with a minimal ROE of 1.31%.
How might the significant premium in ADP's Price-to-Book ratio impact its attractiveness to value investors if interest rates remain elevated?
Can ADP sustain its 6.77% revenue growth trajectory as competitors like Paycom accelerate their own expansion strategies?
What specific operational efficiencies allowed ADP to maintain a 15.81% ROE despite a debt-to-equity ratio higher than some of its top peers?
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