In This Article:
Today we're going to take a look at the well-established Automatic Data Processing, Inc. (NASDAQ:ADP). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$256 at one point, and dropping to the lows of US$210. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Automatic Data Processing's current trading price of US$231 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Automatic Data Processing’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Automatic Data Processing
What's The Opportunity In Automatic Data Processing?
Good news, investors! Automatic Data Processing is still a bargain right now. According to my valuation, the intrinsic value for the stock is $355.20, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Another thing to keep in mind is that Automatic Data Processing’s share price may be quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of Automatic Data Processing look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 27% over the next couple of years, the future seems bright for Automatic Data Processing. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since ADP is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.