Value
5.1/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 5.7 |
| P/S | 7.3 |
| EV/EBITDA | 2.7 |
| Fwd P/E | 6.5 |
| PEG | 4.3 |
| Analyst target | 4.0 |
- ▸Forward P/E: 19.9x
- ▸PEG: 2.20
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.
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VerdictSELL
Overall score5.3/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The business earns a return on equity of 71% and operating margins around 20%, supported by a near-perfect financial health score of 8 out of 9 on the Piotroski scale, placing it comfortably above the peer median on quality. Quality breakdown | Return on equity stays above 50% and operating margins hold above 18% over the next four reported quarters. | →Stable |
| CounterHigh returns on equity can be inflated by share buybacks that shrink the equity base rather than by genuine earnings power; without a deeper moat score, these metrics may not prove durable if revenue growth softens further. | ||
The company beat earnings estimates in each of the three most recent quarters — with the oldest quarter in the sequence coming in only in line — producing an average positive surprise of roughly 1.6% and suggesting a pattern of consistently delivering at or ahead of expectations. Earnings | The company posts a fourth consecutive beat when it next reports earnings in approximately 43 days, with a positive EPS surprise of at least 1%. | →Stable |
| CounterThe average surprise is modest at roughly 1.6%, and the oldest quarter was only in line with estimates, suggesting the streak reflects low-bar setting rather than meaningful operational outperformance. | ||
Price is below the 200-day moving average with the slope declining at roughly 4.6% over the past 30 days, on-balance volume is falling, and a death cross has formed — a combination that signals persistent selling pressure and makes the near-term technical setup unfavorable. Momentum breakdown | The stock reclaims the 200-day moving average and the 30-day MA slope turns positive within 12 months for this pillar to be invalidated. | →Stable |
| CounterMomentum deterioration in a high-quality franchise can reflect sector rotation rather than fundamental impairment; if interest-rate expectations shift, the technical picture may recover without any change to earnings quality. | ||
With the stock just 3.3% below the upside target and the reward-to-risk ratio at 0.6-to-1 — well below a favorable threshold — the current setup offers insufficient compensation for the downside, leaving the position fully priced. Price targets | The setup becomes attractive only if the stock pulls back enough to widen the reward-to-risk ratio above 1.5-to-1, roughly a move back toward the mid-$210s or below. | →Stable |
| CounterAnalyst targets are periodically revised upward; a strong upcoming earnings print could lift the consensus price target and restore headroom, making the current proximity to target a transient rather than structural ceiling. | ||
The business earns a return on equity of 71% and operating margins around 20%, supported by a near-perfect financial health score of 8 out of 9 on the Piotroski scale, placing it comfortably above the peer median on quality.
→StableQuality breakdown
- Expectation
- Return on equity stays above 50% and operating margins hold above 18% over the next four reported quarters.
CounterHigh returns on equity can be inflated by share buybacks that shrink the equity base rather than by genuine earnings power; without a deeper moat score, these metrics may not prove durable if revenue growth softens further.
The company beat earnings estimates in each of the three most recent quarters — with the oldest quarter in the sequence coming in only in line — producing an average positive surprise of roughly 1.6% and suggesting a pattern of consistently delivering at or ahead of expectations.
→StableEarnings
- Expectation
- The company posts a fourth consecutive beat when it next reports earnings in approximately 43 days, with a positive EPS surprise of at least 1%.
CounterThe average surprise is modest at roughly 1.6%, and the oldest quarter was only in line with estimates, suggesting the streak reflects low-bar setting rather than meaningful operational outperformance.
Price is below the 200-day moving average with the slope declining at roughly 4.6% over the past 30 days, on-balance volume is falling, and a death cross has formed — a combination that signals persistent selling pressure and makes the near-term technical setup unfavorable.
→StableMomentum breakdown
- Expectation
- The stock reclaims the 200-day moving average and the 30-day MA slope turns positive within 12 months for this pillar to be invalidated.
CounterMomentum deterioration in a high-quality franchise can reflect sector rotation rather than fundamental impairment; if interest-rate expectations shift, the technical picture may recover without any change to earnings quality.
With the stock just 3.3% below the upside target and the reward-to-risk ratio at 0.6-to-1 — well below a favorable threshold — the current setup offers insufficient compensation for the downside, leaving the position fully priced.
→StablePrice targets
- Expectation
- The setup becomes attractive only if the stock pulls back enough to widen the reward-to-risk ratio above 1.5-to-1, roughly a move back toward the mid-$210s or below.
CounterAnalyst targets are periodically revised upward; a strong upcoming earnings print could lift the consensus price target and restore headroom, making the current proximity to target a transient rather than structural ceiling.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Automatic Data Processing is a high-quality franchise with strong margins and consistent earnings delivery, but the stock has fully priced in its attributes — the technical trend has deteriorated to a confirmed downtrend, the reward-to-risk setup is unfavorable, and the price is within 3.3% of its upside target, leaving little reason to add.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 4.0 |
| Gross margin | 5.7 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 4.1 |
| FCF quality | 7.5 |
| Moat | 6.9 |
| Piotroski F | 8.9 |
- ▸Excellent ROE: 71%
- ▸Strong margins: 20%
- ▸Strong Piotroski F-Score: 8/9
Growth
4.2/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 4.2 |
| EPS growth | 4.1 |
Momentum
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 8.0 |
| Volume | 2.1 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-MA but MA slope flat
Sentiment
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 5.3 |
| erm sentiment | 5.5 |
Insider
5.1/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.2 |
- ▸Negligible insider buying — $459,522 (0.000% of mkt cap)
Peer rank
3.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.8 |
| quality rank | 8.7 |
| growth rank | 2.2 |
- ▸Superior ROE vs peers
Technical
1.8/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.0 |
| support resistance | 0.3 |
| 52w position | 5.2 |
Risk (lower is worse)
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.8 |
| days to cover | 4.4 |
| volatility | 6.0 |
| put call | 7.1 |
| implied vol | 6.3 |
| beta | 8.0 |
| debt equity | 6.8 |
Catalyst
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 3.5 |
| dividend safety | 6.0 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 281.0%
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:26d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.7=NEGATIVE
Warning (1)
- DEATH_CROSS:momentum=7.0>=5.0 recovering
Reward-to-Risk
-0.71
Upside
-8.3%
Downside
11.8%
Sizing output
AVOID
SetupMomentum Cont — Trend continuation, RSI 68, MACD bullish
EdgeCatalyst-Driven — Earnings in 26d with 4/4 beat streak
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 5.3 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:-0.7=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.71 — 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 Technical at 1.8, Peer rank at 3.9, and Growth at 4.2. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -0.71 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 Business Franchise
Trip ifOperating margin falls below 18% for 2 consecutive quarters.
- P2Earnings Consistency Beat Streak
Trip ifEPS surprise stays below 0% for 2 consecutive quarters.
- P3Confirmed Downtrend Death Cross
Trip ifPrice reclaims the 200-day moving average and the 30-day MA slope rises above 0% for 4 consecutive weeks.
- P4Price At Target Thin Reward
Trip ifReward-to-risk ratio rises above 1.5-to-1 as the stock price falls more than 8% from current levels.