Value
4.4/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 4.8 |
| P/S | 6.7 |
| EV/EBITDA | 1.1 |
| Fwd P/E | 5.9 |
| PEG | 3.9 |
| Analyst target | 4.0 |
- ▸Forward P/E: 21.9x
- ▸PEG: 2.70
ADP · Why this verdict
Why Automatic Data Processing (ADP) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictSELL
Overall score5.6/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
ADP is a high-quality, highly profitable software and payroll business (ROE 79%, 144% cash conversion) with positive momentum, but at $293.84 it trades 9.3% above the $266.58 analyst target, leaving no margin of safety.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Forward P/E of 21.7x and PEG of 2.70 indicate growth is fully priced, with value score only 4.5/10. Valuation breakdown | Earnings growth should accelerate so that PEG falls toward 2.0 without a price increase. | ↑Improving |
| CounterDefensive earnings visibility justifies a premium multiple, and a PEG of 2.7 is partly a function of low-but-steady growth. | ||
ADP posts excellent ROE of 79%, 20% margins, cash conversion of 144% FCF/NI and a Piotroski F-Score of 7/9, for a quality score of 7.5. Quality breakdown | Margins should hold near 20% and free cash flow should stay above net income over 12 months. | ↑Improving |
| CounterThe 79% ROE is inflated by a small equity base from buybacks, and leverage (D/E 1.1) already triggers a scoring penalty. | ||
The price of $293.84 is above the $266.58 analyst target (upside of -9.3%), with downside of 12.9% to the stop, a reward-to-risk of -0.72. Bear case | Price should consolidate or analysts should raise targets above $293.84 for the position to be worth adding. | ↑Improving |
| CounterA stable, recurring-revenue compounder can sustain a premium to analyst targets, which lag when earnings quality is high. | ||
Momentum score is 7.1 with rising on-balance volume, volume accumulation and price above the 200-day moving average. Momentum breakdown | Price should stay above the 200-day moving average with momentum score at or above 5.5. | ↑Improving |
| CounterMACD component is weak at 3.4 and price is already above target, so momentum could fade into a pullback. | ||
Insiders sold about $11.6M across 20 sales in the last 90 days with zero buys, a bearish signal, although only 0.010% of market cap. Insider transaction read | Insider selling should stay below $15M over 90 days and not accelerate. | →Stable |
| CounterThe selling is of very low materiality at 0.010% of market cap and could be routine diversification or tax-related. | ||
Forward P/E of 21.7x and PEG of 2.70 indicate growth is fully priced, with value score only 4.5/10.
↑ImprovingValuation breakdown
- Expectation
- Earnings growth should accelerate so that PEG falls toward 2.0 without a price increase.
CounterDefensive earnings visibility justifies a premium multiple, and a PEG of 2.7 is partly a function of low-but-steady growth.
ADP posts excellent ROE of 79%, 20% margins, cash conversion of 144% FCF/NI and a Piotroski F-Score of 7/9, for a quality score of 7.5.
↑ImprovingQuality breakdown
- Expectation
- Margins should hold near 20% and free cash flow should stay above net income over 12 months.
CounterThe 79% ROE is inflated by a small equity base from buybacks, and leverage (D/E 1.1) already triggers a scoring penalty.
The price of $293.84 is above the $266.58 analyst target (upside of -9.3%), with downside of 12.9% to the stop, a reward-to-risk of -0.72.
↑ImprovingBear case
- Expectation
- Price should consolidate or analysts should raise targets above $293.84 for the position to be worth adding.
CounterA stable, recurring-revenue compounder can sustain a premium to analyst targets, which lag when earnings quality is high.
Momentum score is 7.1 with rising on-balance volume, volume accumulation and price above the 200-day moving average.
↑ImprovingMomentum breakdown
- Expectation
- Price should stay above the 200-day moving average with momentum score at or above 5.5.
CounterMACD component is weak at 3.4 and price is already above target, so momentum could fade into a pullback.
Insiders sold about $11.6M across 20 sales in the last 90 days with zero buys, a bearish signal, although only 0.010% of market cap.
→StableInsider transaction read
- Expectation
- Insider selling should stay below $15M over 90 days and not accelerate.
CounterThe selling is of very low materiality at 0.010% of market cap and could be routine diversification or tax-related.
Per-dimension breakdown
Quality
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 4.2 |
| Gross margin | 5.8 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 4.1 |
| FCF quality | 9.8 |
| Moat | 6.1 |
| Piotroski F | 7.8 |
- ▸Excellent ROE: 79%
- ▸Strong margins: 20%
- ▸Excellent cash conversion: 143% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
4.3/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 4.0 |
| EPS growth | 4.7 |
Momentum
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 6.8 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 4.1 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
4.9/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 5.1 |
| erm sentiment | 4.5 |
Insider
6.1/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 6.2 |
| notable moves | 7.0 |
- ▸Insider selling (low materiality) — $12,474,407 (0.011% of mkt cap)
Peer rank
4.4/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.7 |
| quality rank | 8.4 |
| growth rank | 2.4 |
- ▸Superior ROE vs peers
Technical
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 3.2 |
| support resistance | 2.8 |
| 52w position | 9.1 |
| gap | 6.0 |
Risk (lower is worse)
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.7 |
| days to cover | 5.7 |
| volatility | 5.7 |
| put call | 10.0 |
| implied vol | 6.8 |
| max pain risk | 3.0 |
| beta | 8.3 |
| debt equity | 4.8 |
- ▸Above max pain $215
Catalyst
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 3.5 |
| dividend safety | 7.0 |
- ▸Perfect beat streak: 4Q
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:7.0>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:84d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.8=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.82
Upside
-9.4%
Downside
11.4%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 61, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityConservative — Beta 0.79<0.8, Div 2.3%, Q=7.5
Investment implication
The F-path SELL output reflects an overall score of 4.5 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Quality at 7.5) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.8=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.82 — supplementary context, not the trigger for this path.
The strongest dimensions are Quality at 7.5, Momentum at 7.0, and Risk (lower is worse) at 6.6; the weakest are Growth at 4.3, Peer rank at 4.4, and Value at 4.4. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -0.82 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1High Quality Cash Generative Franchise
Trip ifQuality score falls below 6.5 from current 7.5.
- P2Price Above Analyst Target
Trip ifPrice exceeds 20% above the analyst target of $266.58, above about $320.
- P3Full Valuation Multiple
Trip ifForward P/E rises above 25x from current 21.7x.
- P4Positive Price Momentum
Trip ifMomentum score falls below 5.0 from current 7.1.
- P5Insider Selling Bearish Signal
Trip ifInsider 90-day sell value exceeds $25M from current $11.6M.