Is ADP a Good Investment?

OVERVIEW

Automatic Data Processing Incorporation is a company based in the United States. The company offers human capital and human resources management software to companies of all sizes around the world. All of the software the company sells is cloud-based. The company was founded in 1949.

Why You Should?

  1. ADP is a great growth play in an investor’s portfolio. The company offers digital human resources management for companies. This will help companies around the world to reduce their HR costs and make their processes more efficient. Furthermore, the cloud business is quickly growing around the world, something that will help ADP grow.
  2. Companies around the world are modernizing their processes for the digital world. ADP is a great way for companies to digitize a key part of their business, the HR department. As businesses continue to modernize, ADP will see the demand for digital HR software continue to rise. This will also benefit investors in the company.
  3. The COVID-19 pandemic has sped up the digitization of companies and businesses around the world. As everyone started to work from home, businesses wanted to look for more efficient and safer ways to conduct HR operations. They turned to ADP’s software, something that caused the company to see rising demand and report good numbers on earnings reports.
  4. ADP is a software as a service business (SaaS). These business models involve a company developing software and selling it to customers around the world. Because of limited development and maintenance costs, these business models are extremely profitable, and ADP is no exception. A profitable business will benefit the company and investors.
  5. The company has reported rising revenues and profits over the past couple of years due to the reasons mentioned above. This has helped the company grow its business and expand its product offerings. This has also benefited investors in the company, who have seen the stock price rise considerably. In the financial year of 2020, the company reported revenues of around 14.59 billion and profits of around 2.47 billion. Both of these metrics are higher than what the company reported in the financial year of 2019 when they had revenues of around 14.11 billion and profits of around 2.29 billion.

Why You Should Not?

  1. ADP faces tough competition in the cloud-based software industry. Some of these companies include Oracle, SAP, and many others. This competition might hurt the company and its investors in the future.

MY OPINION

I think that ADP is a great long-term investment due to its position as a good growth play, the modernizing business world, positive impacts from the pandemic, a profitable business model, as well as rising revenues and profits. However, tough competition might hurt the company and its investors in the future.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.