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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Automatic Data Processing Inc., economic profit calculation

US$ in thousands

12 months ended:	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
Net operating profit after taxes (NOPAT)¹	2,334,712)	2,508,856)	2,290,136)	1,628,778)	1,771,847)	1,527,436)
Cost of capital²	11.44%	11.41%	11.45%	11.43%	11.34%	11.23%
Invested capital³	10,152,600)	9,580,300)	9,463,158)	7,289,794)	7,519,836)	7,921,908)

Economic profit⁴	1,172,985)	1,415,792)	1,206,158)	795,738)	918,891)	637,895)

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,334,712 – 11.44% × 10,152,600 = 1,172,985

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Automatic Data Processing Inc., NOPAT calculation

US$ in thousands

12 months ended:	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
Net earnings	2,598,500)	2,466,500)	2,292,800)	1,620,800)	1,733,400)	1,492,500)
Deferred income tax expense (benefit)¹	(251,100)	26,000)	9,300)	500)	8,100)	700)
Increase (decrease) in allowance for doubtful accounts²	(12,900)	37,600)	3,600)	1,700)	11,500)	2,600)
Increase (decrease) in deferred revenues³	(16,800)	(36,900)	(53,800)	(20,000)	10,000)	23,000)
Increase (decrease) in equity equivalents⁴	(280,800)	26,700)	(40,900)	(17,800)	29,600)	26,300)
Interest expense	59,700)	107,100)	129,900)	102,700)	80,000)	56,200)
Interest expense, operating lease liability⁵	9,634)	10,118)	15,200)	14,153)	12,510)	13,101)
Adjusted interest expense	69,334)	117,218)	145,100)	116,853)	92,510)	69,301)
Tax benefit of interest expense⁶	(14,560)	(24,616)	(30,471)	(32,836)	(32,379)	(24,255)
Adjusted interest expense, after taxes⁷	54,774)	92,602)	114,629)	84,017)	60,132)	45,046)
(Gain) loss on marketable securities	(11,300)	(12,900)	900)	2,500)	(2,200)	5,000)
Interest income on corporate funds	(36,500)	(84,500)	(97,600)	(83,500)	(76,700)	(62,400)
Investment income, before taxes	(47,800)	(97,400)	(96,700)	(81,000)	(78,900)	(57,400)
Tax expense (benefit) of investment income⁸	10,038)	20,454)	20,307)	22,761)	27,615)	20,090)
Investment income, after taxes⁹	(37,762)	(76,946)	(76,393)	(58,239)	(51,285)	(37,310)
(Income) loss from discontinued operations, net of tax¹⁰	—)	—)	—)	—)	—)	900)
Net operating profit after taxes (NOPAT)	2,334,712)	2,508,856)	2,290,136)	1,628,778)	1,771,847)	1,527,436)

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in deferred revenues.

⁴ Addition of increase (decrease) in equity equivalents to net earnings.

⁵ 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 437,900 × 2.20% = 9,634

⁶ 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 69,334 × 21.00% = 14,560

⁷ Addition of after taxes interest expense to net earnings.

⁸ 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 47,800 × 21.00% = 10,038

⁹ Elimination of after taxes investment income.

¹⁰ Elimination of discontinued operations.

Net Earnings: The net earnings exhibited an overall increasing trend from 2016 to 2021. Starting at $1,492,500 thousand in 2016, the figure rose to $1,733,400 thousand in 2017 before experiencing a slight decline to $1,620,800 thousand in 2018. After this dip, net earnings showed a significant increase to $2,292,800 thousand in 2019, continuing upward to $2,466,500 thousand in 2020 and reaching $2,598,500 thousand in 2021. This pattern suggests a strong recovery and consistent growth momentum in recent years despite minor fluctuations.
Net Operating Profit After Taxes (NOPAT): The NOPAT values closely mirror the net earnings trend with increasing values from 2016 through 2020 followed by a decline in 2021. Initially, NOPAT rose from $1,527,436 thousand in 2016 to $1,771,847 thousand in 2017 but then decreased to $1,628,778 thousand in 2018. It rebounded substantially to $2,290,136 thousand in 2019 and increased further to a peak of $2,508,856 thousand in 2020. In 2021, however, NOPAT declined to $2,334,712 thousand. This decline in 2021 contrasts with the continued rise in net earnings, highlighting potential changes in operational efficiency, tax impacts, or adjustments in operating expenses.
Comparative Insights: Both metrics demonstrate a pattern of growth punctuated by a downturn in 2018, followed by robust increases through 2020. The divergence observed in 2021, where net earnings continued to grow but NOPAT decreased, may require further investigation. This discrepancy could point to factors such as non-operating income influences on net earnings, changes in tax structures, or operational cost shifts affecting NOPAT independently of net profits. Overall, the financial data shows resilience with strong profitability gains over the period analyzed.

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Automatic Data Processing Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
Provision for income taxes	762,700)	716,100)	712,800)	550,300)	797,700)	741,300)
Less: Deferred income tax expense (benefit)	(251,100)	26,000)	9,300)	500)	8,100)	700)
Add: Tax savings from interest expense	14,560)	24,616)	30,471)	32,836)	32,379)	24,255)
Less: Tax imposed on investment income	10,038)	20,454)	20,307)	22,761)	27,615)	20,090)
Cash operating taxes	1,018,322)	694,262)	713,664)	559,875)	794,364)	744,765)

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

Provision for Income Taxes: The provision for income taxes showed fluctuations over the period under review. It initially increased from 741,300 thousand US dollars in mid-2016 to 797,700 thousand US dollars by mid-2017. This was followed by a notable decline to 550,300 thousand US dollars in mid-2018. Subsequently, the provision rose again, reaching 712,800 thousand US dollars in 2019 and remaining relatively stable around 716,100 thousand US dollars in 2020. By mid-2021, it increased slightly to 762,700 thousand US dollars. Overall, the data indicate some volatility with a general tendency towards recovery and growth in the latter years.
Cash Operating Taxes: Cash operating taxes mirrored the trends of provision for income taxes, reflecting a general correlation between the two metrics. Starting at 744,765 thousand US dollars in 2016, cash operating taxes slightly decreased to 794,364 thousand US dollars in 2017 before falling significantly to 559,875 thousand US dollars in 2018. Subsequently, there was an increase to 713,664 thousand US dollars in 2019. In 2020, there was a slight decrease to 694,262 thousand US dollars, followed by a substantial jump to 1,018,322 thousand US dollars in 2021. The sharp increase in 2021 suggests a possible change in tax obligations or operational cash flows impacting tax payments.
Comparative Insights: Both the provision for income taxes and cash operating taxes show some alignment in their patterns with synchronous ups and downs over the years. However, cash operating taxes experienced a more pronounced increase in 2021 compared to the provision for income taxes, indicating either an adjustment in timing or recognition of actual cash tax payments vis-à-vis accounting provisions. This divergence in the final year could warrant further investigation to understand underlying causes such as changes in tax policy, fiscal adjustments, or operational factors.

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Automatic Data Processing Inc., invested capital calculation (financing approach)

US$ in thousands

	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
Obligations under reverse repurchase agreements	23,500)	13,600)	262,000)	—)	—)	—)
Short-term debt	—)	1,001,800)	—)	—)	—)	—)
Long-term debt	2,985,000)	1,002,800)	2,002,200)	2,002,400)	2,002,400)	2,007,700)
Operating lease liability¹	437,900)	439,900)	542,858)	484,694)	428,436)	445,608)
Total reported debt & leases	3,446,400)	2,458,100)	2,807,058)	2,487,094)	2,430,836)	2,453,308)
Stockholders’ equity	5,670,100)	5,752,200)	5,399,900)	3,459,600)	3,977,000)	4,481,600)
Net deferred tax (assets) liabilities²	434,700)	693,200)	595,900)	17,200)	69,700)	150,800)
Allowance for doubtful accounts³	79,600)	92,500)	54,900)	51,300)	49,600)	38,100)
Deferred revenues⁴	566,300)	583,100)	620,000)	604,300)	624,300)	614,300)
Equity equivalents⁵	1,080,600)	1,368,800)	1,270,800)	672,800)	743,600)	803,200)
Accumulated other comprehensive (income) loss, net of tax⁶	(10,600)	14,800)	257,300)	680,800)	379,200)	215,100)
Adjusted stockholders’ equity	6,740,100)	7,135,800)	6,928,000)	4,813,200)	5,099,800)	5,499,900)
Marketable securities⁷	(33,900)	(13,600)	(271,900)	(10,500)	(10,800)	(31,300)
Invested capital	10,152,600)	9,580,300)	9,463,158)	7,289,794)	7,519,836)	7,921,908)

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenues.

⁵ Addition of equity equivalents to stockholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of marketable securities.

Total reported debt & leases: The total reported debt and leases figures indicate some fluctuations over the analyzed periods. Initially, the debt remained relatively stable between 2016 and 2018, with values just above 2.4 billion US dollars. In 2019, there was a noticeable increase to approximately 2.81 billion, followed by a decrease in 2020 to around 2.46 billion. However, by 2021, the debt sharply increased to approximately 3.45 billion, representing the highest level within the given timeframe.
Stockholders’ equity: The stockholders’ equity showed a declining trend from 2016 to 2018, dropping from about 4.48 billion to around 3.46 billion US dollars. A significant recovery is observed in 2019, with equity rising sharply to approximately 5.4 billion, continuing to increase moderately in 2020 to about 5.75 billion. In 2021, there was a slight decrease to roughly 5.67 billion, though equity remained well above the levels seen in the initial years.
Invested capital: Invested capital experienced a downward trend from 2016 through 2018, declining from approximately 7.92 billion to about 7.29 billion US dollars. In 2019, invested capital increased markedly to roughly 9.46 billion, and then grew slightly in 2020 to approximately 9.58 billion. The upward movement continued into 2021, reaching around 10.15 billion, the highest level in the period examined.
Overall analysis: The data reflect a period of contraction in both equity and invested capital through 2018, followed by a phase of robust growth starting in 2019. The sudden increase in total debt in 2021, coupled with the continued growth in invested capital, suggests increased leverage and investment activity during that year. Despite the spike in debt in 2021, stockholders’ equity remained relatively strong compared to earlier years, indicating a potentially balanced approach to financing growth with a mix of debt and equity.

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Automatic Data Processing Inc., cost of capital calculations

Jun 30, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	89,693,078)	89,693,078)	÷	93,221,778)	=	0.96	0.96	×	11.82%	=	11.37%
Debt³	3,090,800)	3,090,800)	÷	93,221,778)	=	0.03	0.03	×	2.37% × (1 – 21.00%)	=	0.06%
Operating lease liability⁴	437,900)	437,900)	÷	93,221,778)	=	0.00	0.00	×	2.20% × (1 – 21.00%)	=	0.01%
Total:	93,221,778)					1.00					11.44%

Based on: 10-K (reporting date: 2021-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	57,946,438)	57,946,438)	÷	60,533,038)	=	0.96	0.96	×	11.82%	=	11.31%
Debt³	2,146,700)	2,146,700)	÷	60,533,038)	=	0.04	0.04	×	2.91% × (1 – 21.00%)	=	0.08%
Operating lease liability⁴	439,900)	439,900)	÷	60,533,038)	=	0.01	0.01	×	2.30% × (1 – 21.00%)	=	0.01%
Total:	60,533,038)					1.00					11.41%

Based on: 10-K (reporting date: 2020-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	72,785,232)	72,785,232)	÷	75,660,390)	=	0.96	0.96	×	11.82%	=	11.37%
Debt³	2,332,300)	2,332,300)	÷	75,660,390)	=	0.03	0.03	×	2.80% × (1 – 21.00%)	=	0.07%
Operating lease liability⁴	542,858)	542,858)	÷	75,660,390)	=	0.01	0.01	×	2.80% × (1 – 21.00%)	=	0.02%
Total:	75,660,390)					1.00					11.45%

Based on: 10-K (reporting date: 2019-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	58,812,610)	58,812,610)	÷	61,286,304)	=	0.96	0.96	×	11.82%	=	11.34%
Debt³	1,989,000)	1,989,000)	÷	61,286,304)	=	0.03	0.03	×	2.92% × (1 – 28.10%)	=	0.07%
Operating lease liability⁴	484,694)	484,694)	÷	61,286,304)	=	0.01	0.01	×	2.92% × (1 – 28.10%)	=	0.02%
Total:	61,286,304)					1.00					11.43%

Based on: 10-K (reporting date: 2018-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	49,498,904)	49,498,904)	÷	51,999,240)	=	0.95	0.95	×	11.82%	=	11.25%
Debt³	2,071,900)	2,071,900)	÷	51,999,240)	=	0.04	0.04	×	2.92% × (1 – 35.00%)	=	0.08%
Operating lease liability⁴	428,436)	428,436)	÷	51,999,240)	=	0.01	0.01	×	2.92% × (1 – 35.00%)	=	0.02%
Total:	51,999,240)					1.00					11.34%

Based on: 10-K (reporting date: 2017-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	40,905,387)	40,905,387)	÷	43,499,695)	=	0.94	0.94	×	11.82%	=	11.11%
Debt³	2,148,700)	2,148,700)	÷	43,499,695)	=	0.05	0.05	×	2.94% × (1 – 35.00%)	=	0.09%
Operating lease liability⁴	445,608)	445,608)	÷	43,499,695)	=	0.01	0.01	×	2.94% × (1 – 35.00%)	=	0.02%
Total:	43,499,695)					1.00					11.23%

Based on: 10-K (reporting date: 2016-06-30).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Automatic Data Processing Inc., economic spread ratio calculation, comparison to benchmarks

	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
Selected Financial Data (US$ in thousands)
Economic profit¹	1,172,985)	1,415,792)	1,206,158)	795,738)	918,891)	637,895)
Invested capital²	10,152,600)	9,580,300)	9,463,158)	7,289,794)	7,519,836)	7,921,908)
Performance Ratio
Economic spread ratio³	11.55%	14.78%	12.75%	10.92%	12.22%	8.05%
Benchmarks
Economic Spread Ratio, Competitors⁴
Accenture PLC	8.69%	9.26%	—	—	—	—
Adobe Inc.	11.81%	4.09%	2.20%	—	—	—
AppLovin Corp.	-23.77%	—	—	—	—	—
Cadence Design Systems Inc.	9.12%	9.93%	—	—	—	—
CrowdStrike Holdings Inc.	-6.51%	4.34%	—	—	—	—
Datadog Inc.	0.35%	-5.32%	—	—	—	—
International Business Machines Corp.	-5.21%	-4.87%	—	—	—	—
Intuit Inc.	0.67%	4.06%	—	—	—	—
Microsoft Corp.	31.88%	29.92%	—	—	—	—
Oracle Corp.	5.45%	-0.16%	—	—	—	—
Palantir Technologies Inc.	-48.47%	-88.47%	—	—	—	—
Palo Alto Networks Inc.	-2.97%	-3.95%	—	—	—	—
Salesforce Inc.	-8.92%	-11.94%	—	—	—	—
ServiceNow Inc.	4.21%	5.83%	—	—	—	—
Synopsys Inc.	-4.00%	-3.82%	-6.80%	—	—	—
Workday Inc.	-15.70%	-19.18%	—	—	—	—

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,172,985 ÷ 10,152,600 = 11.55%

⁴ Click competitor name to see calculations.

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Automatic Data Processing Inc., economic profit margin calculation, comparison to benchmarks

	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
Selected Financial Data (US$ in thousands)
Economic profit¹	1,172,985)	1,415,792)	1,206,158)	795,738)	918,891)	637,895)

Revenues	15,005,400)	14,589,800)	14,175,200)	13,325,800)	12,379,800)	11,667,800)
Add: Increase (decrease) in deferred revenues	(16,800)	(36,900)	(53,800)	(20,000)	10,000)	23,000)
Adjusted revenues	14,988,600)	14,552,900)	14,121,400)	13,305,800)	12,389,800)	11,690,800)
Performance Ratio
Economic profit margin²	7.83%	9.73%	8.54%	5.98%	7.42%	5.46%
Benchmarks
Economic Profit Margin, Competitors³
Accenture PLC	4.45%	4.71%	—	—	—	—
Adobe Inc.	14.72%	5.86%	3.30%	—	—	—
AppLovin Corp.	-47.60%	—	—	—	—	—
Cadence Design Systems Inc.	9.27%	10.00%	—	—	—	—
CrowdStrike Holdings Inc.	-13.53%	3.81%	—	—	—	—
Datadog Inc.	0.28%	-4.08%	—	—	—	—
International Business Machines Corp.	-9.94%	-8.47%	—	—	—	—
Intuit Inc.	0.85%	4.56%	—	—	—	—
Microsoft Corp.	26.46%	22.21%	—	—	—	—
Oracle Corp.	10.78%	-0.37%	—	—	—	—
Palantir Technologies Inc.	-79.83%	-180.21%	—	—	—	—
Palo Alto Networks Inc.	-4.00%	-6.41%	—	—	—	—
Salesforce Inc.	-20.46%	-29.38%	—	—	—	—
ServiceNow Inc.	3.64%	4.76%	—	—	—	—
Synopsys Inc.	-6.37%	-6.57%	-11.75%	—	—	—
Workday Inc.	-20.48%	-24.67%	—	—	—	—

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

¹ Economic profit. See details »

² 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 1,172,985 ÷ 14,988,600 = 7.83%

³ Click competitor name to see calculations.

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Automatic Data Processing Inc. (NASDAQ:ADP)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin