Buffett Brain · Research note
Score updated 26 Sept 2026
ADP· Industrials
Automatic Data Processing
ADP's top-quintile ROIC and stable margins suggest a durable moat, but valuation appears stretched at a 20.7 P/E.
Buffett fit
Partial fit
Owner
82
Durability
91
Management
70
Price
51
Score updated 26 Sept 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Industrials stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
Owning 100% of ADP would mean benefiting from its strong of 25.5% and robust net margins of 20.1%.
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ADP's durability is underscored by its top-quintile and consistent profitability over the last 5 years.
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ADP's is disciplined, with a 5-year share count CAGR of -1.15% and a yield of 1.56%.
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With an earnings yield of 4.84% and yield of 5.33%, ADP's valuation is not a bargain.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
7- 1 of 25.5% ranks in the top quintile for the Industrials sector.
- 2Net margin of 20.1% is well above the sector's top-quintile cutoff of 13.9%.
- 35-year EPS CAGR of 13.21% indicates strong growth momentum.
- 4/Net Income ratio of 1.17 suggests high earnings quality.
Concerns
5- 1 of 20.7 may reflect an optimistic growth outlook, limiting .
- 2Current ratio of 1.04 suggests limited short-term liquidity buffer.
- 3Valuation multiples like EV/ of 16.7 indicate a premium pricing.
- 4Debt/Equity ratio of 0.63, while manageable, could be improved for greater financial flexibility.
Price history
$295+35.2%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
ADP provides cloud-based human capital management solutions, divided into Employer Services and PEO segments. Employer Services offers payroll, HR management, and compliance services, while PEO Services provide HR outsourcing for small and mid-sized businesses. With $20.56B in revenue and a 47.5% , ADP's unit economics are strong, driven by and high client retention.
How this analysis has moved
The call has held across 5 reviews.
Sep 27, 2026 → Oct 21, 2026
What other investors would say
The same company, judged by three other documented playbooks.
Keep researching
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Questions about Automatic Data Processing
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