What to Know About Automatic Data Processing (ADP) Stock

8). ADP stock is not without risks, though, such as from Intuit Inc. (NASDAQ:INTU). It already offers businesses helpful software for accounting and taxes, and it’s not a huge stretch to see it expanding its offerings to those customers and others. It’s also looking to offer apps to businesses, such as ones helping banks with mobile banking. (Of course, ADP has apps, too, with more than a million workers using them.) Paychex, Inc. (NASDAQ:PAYX), focusing in general on smaller companies, is also a threat, but ADP has recently been posting more robust growth numbers. Even if both companies were to grow slowly, though, they offer rather reliable and therefore attractive income streams via their dividends.

9). One of the few downsides of ADP stock is that it doesn’t appear to be bargain-priced right now. Its recent P/E is around 25, and its forward P/E near 22, both considerably ahead of its five-year average of 18.5. Its five-year average annual growth rates for revenue and earnings are both below 5%, but they’ve been picking up the pace in recent years, clocking in near 9% and 11%, respectively, over the past year.

10). Factors in favor of a promising future for ADP stock include our recovering economy. More people employed means more business for ADP. It’s growing internationally, too, in part organically and in part via acquisition. Some have even waxed hopeful about ADP stock because the fall of DOMA leading to more people being added to company benefit rolls in the form of same-sex spouses. A rise in interest rates can help, too.

ADP stock is worth considering if you’re looking for a solid long-term performer as well as dividend income. You could buy some now — or, if you see it as overvalued at the moment, add it your watch list and hope that the price drops some, offering an entry point with greater margin of safety.

The article 10 Things to Know About ADP Stock originally appeared on Fool.com  and is written by Selena Maranjian.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Ford and Paychex. The Motley Fool recommends Automatic Data Processing, Bank of America, Facebook, Ford, Intuit, and Paychex and owns shares of Bank of America, Facebook, Ford, and Intuit.

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