Automatic Data Processing (ADP) Beat Expectations, Is The Stock Still Fully Valued?

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Automatic Data Processing (ADP) shares were in focus after the company reported fiscal fourth quarter and full year 2026 results that exceeded consensus expectations on revenue and earnings, alongside guidance for fiscal 2027 and continued AI investment.

See our latest analysis for Automatic Data Processing.

The latest earnings beat and AI commentary have come alongside a sharp swing in Automatic Data Processing's share price, with a 21.51% 1 month share price return and 28.98% 3 month share price return, even as the 1 year total shareholder return declined 9.64%.

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Automatic Data Processing now appears to be a strong, steadily executing HR and payroll business, and the market has quickly re-rated it following the latest earnings and AI update. After such a sharp move, is the stock still priced sensibly today?

Most Popular Narrative: 6.1% Overvalued

Automatic Data Processing closed at $273.37 compared with a narrative fair value of about $257.53, which frames the current debate around the recent share price jump.

Adoption of Next Gen products (like Lyric HCM and Workforce Now Next Gen) and integration of acquisitions (e.g., WorkForce Software) are accelerating demand for advanced, cloud-based, and AI-driven HR solutions, directly locking in higher average revenue per user and supporting earnings growth through margin expansion.

Read the complete narrative.Read the complete narrative.

Want to understand why this pricing power story supports a higher valuation multiple? The narrative leans heavily on rising per client revenue, firmer margins, and a detailed future earnings profile. Curious which growth and profitability assumptions sit underneath that fair value line?

Result: Fair Value of $257.53 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, there are still clear pressure points for Automatic Data Processing, including slower bookings growth in complex deals and rising zero margin PEO pass through revenue that could weigh on profitability.

Find out about the key risks to this Automatic Data Processing narrative.

Another View: SWS DCF Model Points To Undervaluation

The analyst narrative pegs Automatic Data Processing at about 6.1% overvalued around $257.53, yet the SWS DCF model points the other way. On that framework, ADP at $273.37 screens as trading about 30.7% below an estimated future cash flow value of $394.55, which is a wide gap for any long term investor to ignore. How comfortable are you with the assumptions behind each approach?

Story Continues

For a closer look at how those long term cash flows are modeled for Automatic Data Processing, including the key inputs that drive that $394.55 figure, Look into how the SWS DCF model arrives at its fair value.ADP Discounted Cash Flow as at Jul 2026

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Automatic Data Processing for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If the mixed signals around Automatic Data Processing have you undecided, now is a good time to review the facts and form your own view. To see which rewards investors are focusing on right now, take a closer look at the 4 key rewards

Looking for more investment ideas beyond Automatic Data Processing?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include ADP.

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