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FIN 560 Course Project.docx.pdf
FIN_560_Course_Project.docx.pdf
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Fin | 560 | Investments | study guides |ADP, Inc. ...
Fin | 560 | Investments | study_guides |ADP, Inc. ADP, Inc. Stock Analysis Keller Graduate School of Management February 17, 2018 Professor: Dr. Paul Tovbin FIN 560 - Securities Analysis Table of Contents 1 ADP, Inc. 1.0 Face Page……………………………………………………………………………….1 2.0 Table of Contents……………………………………………………………………….2 3.0 Introduction………………………………………………………………………….….3 4.0 Company’s Bac
Fin | 560 | Investments | study gui...
Fin | 560 | Investments | study_guides |ADP, Inc. ADP, Inc. Stock Analysis Keller Graduate School of Management February 17, 2018 Professor: Dr. Paul Tovbin FIN 560 - Securities Analysis Table of Contents 1 ADP, Inc. 1.0 Face Page……………………………………………………………………………….1 2.0 Table of Contents……………………………………………………………………….2 3.0 Introduction………………………………………………………………………….….3 4.0 Company’s Bac
Page 1
ADP, Inc.
ADP, Inc. Stock Analysis
Keller Graduate School of Management
February 17, 2018
Professor: Dr. Paul Tovbin
FIN 560 - Securities Analysis
Table of Contents
1
Page 2
ADP, Inc.
1.0
Face Page……………………………………………………………………………….1
2.0
Table of Contents……………………………………………………………………….2
3.0
Introduction………………………………………………………………………….….3
4.0
Company’s Background. ……………………………………………………………….4
5.0
Life Cycle Analysis……………………………………………………………………..4
6.0
An Analysis of Return on Equity……………………………………………………….5
7.0
Projected Future Growth Rate of Earnings……………………………………………..6
8.0
Analysis of Required Rate of Return –CAPM………………………………………….7
9.0
Intrinsic Value (DVT)…………………………………………………………………..8
10.0
Conclusion/Recommendation……………………………………………………
..........
8
11.0
References………………………………………………………………………………9
2
Page 3
ADP, Inc.
3.0
Introduction
Stock analysis can be a daunting and attempting to create an investment portfolio on your
own can be stressful for the untrained investor. Hence the reason many investors invest through
investment firms or utilize standard 401K investment plans. However, many individuals may
seek to investment in specific companies for personal reasons, desires, or a gut instinct. With this
in mind, I am reviewing one company that I have a personal interest and history with, ADP, Inc.
Having both worked for the company and having a spouse who is a 12 year employee of
the company, I have watch this company grow significantly over the years and have realized the
size of the earnings that could have been attained had I invested from the beginning. As such, I
will be performing an analysis to determine if the future potential growth can be as significant as
the past.
4.0 Company Background
Automated Data Processing (
ADP, Inc.) was founded in 1949 by Henry Taub (originally
3
Page 4
ADP, Inc.
Automatic Payrolls, Inc. a manual payroll processing company). In 1961, it went public with
annual revenues of roughly $400 million. It has since grown into the largest Human Resource
Management and Payroll Company in the world, with locations in 112 countries and annual
(2017) revenues exceeding $12.4 billion.
ADP, Inc. common stock is listed on the National Association of Securities Dealers
Automated Quotations (NASDAQ) under the symbol of “ADP”. Until splitting off its dealer
services unit, it was one of only four American companies to receive a triple A credit rating from
both Standard & Poor and Moody’s. It is a Fortune 500 company (ranked at 240 as of 2017),
having spent 23 years on the Fortune 500 list. The largest portion (77%) of ADP’s revenue is
earned through Employer Services (e.g. Payroll, Compliance, HR and Benefits). Due to the
diversified nature of ADP’s business, it has many direct depending on the service. Traditionally, I
compare ADP, Inc. to its largest direct American competitor, PayChex, Inc. (PAYX), which is
also traded on the NASDAQ. PAYX had 2017 revenues of approximately $3.2 billion (25.8 % of
ADP, Inc. Revenue).
According to its 2017 Annual Report, the company expects a growth in revenue between
5% to 6% with adjusted diluted earnings per share growth of 2% and 4%.
ADP, Inc. is
considered a global leader in the provision of Human Capital Management solutions.
5.0
Life Cycle Analysis
The Life Cycle Analysis consists of 4 stages, which include Rapid Growth, Stable
4
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