Name: Automatic Data Processing Inc. (NASDAQ:ADP) | Economic Value Added (EVA)
Creator: Stock Analysis on Net

EVA is registered trademark of Stern Stewart.

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

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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	13.48%	13.44%	13.49%	13.46%	13.36%	13.22%
Invested capital³	10,152,600)	9,580,300)	9,463,158)	7,289,794)	7,519,836)	7,921,908)

Economic profit⁴	966,198)	1,221,652)	1,013,443)	647,648)	767,357)	480,196)

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 – 13.48% × 10,152,600 = 966,198

The financial performance from June 30, 2016, to June 30, 2021, is characterized by a general upward trajectory in value creation, despite fluctuations in operating profit and a significant expansion of the capital base in the latter half of the period.

Net Operating Profit After Taxes (NOPAT): A consistent growth trend is observed in NOPAT, increasing from 1,527,436 thousand US$ in 2016 to a peak of 2,508,856 thousand US$ in 2020. While a temporary decline occurred in 2018 and a subsequent moderation in 2021, the overall movement indicates a substantial increase in the entity's ability to generate operating earnings after tax.
Cost of Capital: The cost of capital remained remarkably stable throughout the six-year period. Values fluctuated within a narrow range between 13.22% and 13.49%, suggesting a consistent risk profile and a stable weighted average cost of funding for the organization.
Invested Capital: Invested capital exhibited two distinct phases. Between 2016 and 2018, there was a gradual reduction from 7,921,908 thousand US$ to 7,289,794 thousand US$. However, starting in 2019, a significant capital expansion occurred, with invested capital rising sharply to 9,463,158 thousand US$ and continuing upward to reach 10,152,600 thousand US$ by 2021.
Economic Profit and Value Creation: Economic profit followed a pattern closely aligned with NOPAT, growing from 480,196 thousand US$ in 2016 to a maximum of 1,221,652 thousand US$ in 2020. The fact that economic profit remained positive throughout the entire period indicates that the company consistently generated returns in excess of its cost of capital. The peak in 2020 demonstrates the highest level of value creation, although a contraction to 966,198 thousand US$ in 2021 suggests a tightening of the spread between NOPAT and the capital charge, influenced by the continued increase in invested capital.

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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.

An analysis of profitability and operational performance between 2016 and 2021 reveals a general upward trajectory in both net earnings and net operating profit after taxes (NOPAT), although a notable divergence emerged in the final fiscal year.

Net Earnings Trend: Net earnings demonstrated consistent long-term growth, rising from US$ 1,492,500 thousand in 2016 to US$ 2,598,500 thousand in 2021. While a slight contraction was observed in 2018, this was followed by a period of rapid expansion starting in 2019, with earnings increasing by approximately 41% between 2018 and 2019.
NOPAT Performance and Volatility: NOPAT followed a similar growth pattern to net earnings for the majority of the period, peaking at US$ 2,508,856 thousand in 2020. However, unlike net earnings, NOPAT experienced a decline in 2021, falling to US$ 2,334,712 thousand. This indicates a reduction in core operating profitability during the final year of the period despite overall bottom-line growth.
Correlation Between Operating Profit and Net Income: From 2016 to 2020, NOPAT remained closely aligned with or exceeded net earnings, suggesting that operational activities were the primary driver of value creation. The 2021 fiscal year marks a significant shift where net earnings continued to climb while NOPAT decreased, implying that non-operating income or other non-core financial factors contributed to the net profit increase while operational efficiency declined.

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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).

The financial data for the period ending June 30, 2016, through June 30, 2021, reveals a fluctuating trend in tax-related obligations, characterized by a significant contraction in 2018 and a substantial divergence between accrual-based provisions and cash outflows by 2021.

Provision for Income Taxes Trends: The provision for income taxes experienced an initial increase between 2016 and 2017, rising from 741,300 to 797,700 thousand US dollars. A sharp decline occurred in 2018, where the provision fell to 550,300 thousand US dollars, representing the lowest point in the observed period. From 2019 onward, a recovery trend is observed, with the provision stabilizing around 712,000 to 716,000 thousand US dollars before climbing to 762,700 thousand US dollars in 2021.
Cash Operating Taxes Trends: Cash operating taxes largely mirrored the trajectory of the income tax provisions from 2016 to 2019, including the marked decrease in 2018 to 559,875 thousand US dollars. However, a deviation occurred in 2020, where cash operating taxes decreased to 694,262 thousand US dollars despite a slight increase in the tax provision. The most notable variance appeared in 2021, with cash operating taxes surging to 1,018,322 thousand US dollars, the highest value across all recorded years.
Comparative Analysis of Accrual and Cash Taxes: For the majority of the analyzed period, the provision for income taxes and cash operating taxes remained closely aligned, suggesting that accrual-based tax expenses were a reliable proxy for actual cash outflows. This correlation broke down significantly in the final fiscal year. In 2021, the cash operating taxes exceeded the provision for income taxes by approximately 255,622 thousand US dollars. This indicates a substantial increase in cash tax payments relative to the reported tax expense, which may impact the calculation of Economic Value Added (EVA) by increasing the actual cash cost of taxes for that period.

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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.

Between June 30, 2016, and June 30, 2021, invested capital exhibited a cyclical trajectory characterized by an initial contraction followed by a period of significant expansion. Total invested capital reached its lowest point in 2018 before experiencing a substantial increase that continued through the end of the analyzed period.

Total Reported Debt and Leases: Debt and lease obligations remained relatively stable between 2016 and 2018, oscillating around the 2.4 billion range. A moderate increase was observed in 2019, followed by a reduction in 2020. However, a sharp escalation occurred by June 30, 2021, with total reported debt and leases rising to 3.45 billion, marking a significant increase in leverage toward the end of the period.
Stockholders' Equity: A downward trend in stockholders' equity was evident from 2016 to 2018, where values declined from 4.48 billion to 3.46 billion. This trend reversed abruptly in 2019, with equity rising to 5.40 billion. This elevated level was largely maintained through 2021, despite a marginal decrease in the final year to 5.67 billion.
Invested Capital Analysis: Invested capital decreased from 7.92 billion in 2016 to a minimum of 7.29 billion in 2018. A significant inflection point occurred in 2019, as invested capital rose to 9.46 billion, driven primarily by the recovery in stockholders' equity. This growth trajectory persisted, with invested capital reaching 10.15 billion by June 30, 2021, reflecting an overall increase in the capital base used to generate economic value.

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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	×	13.94%	=	13.41%
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					13.48%

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	×	13.94%	=	13.34%
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					13.44%

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	×	13.94%	=	13.41%
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					13.49%

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	×	13.94%	=	13.37%
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					13.46%

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	×	13.94%	=	13.27%
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					13.36%

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	×	13.94%	=	13.11%
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					13.22%

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 »

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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	966,198)	1,221,652)	1,013,443)	647,648)	767,357)	480,196)
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	9.52%	12.75%	10.71%	8.88%	10.20%	6.06%
Benchmarks
Economic Spread Ratio, Competitors⁴
Accenture PLC	5.81%	6.41%	—	—	—	—
Adobe Inc.	8.97%	1.25%	—	—	—	—
AppLovin Corp.	-29.58%	—	—	—	—	—
Cadence Design Systems Inc.	6.80%	—	—	—	—	—
Datadog Inc.	-3.88%	—	—	—	—	—
International Business Machines Corp.	-6.21%	—	—	—	—	—
Intuit Inc.	0.11%	—	—	—	—	—
Microsoft Corp.	27.58%	—	—	—	—	—
Oracle Corp.	0.65%	—	—	—	—	—
Palantir Technologies Inc.	-39.96%	—	—	—	—	—
Palo Alto Networks Inc.	-5.17%	—	—	—	—	—
Salesforce Inc.	-12.36%	—	—	—	—	—
ServiceNow Inc.	1.94%	—	—	—	—	—
Synopsys Inc.	-6.86%	-6.67%	—	—	—	—
Workday Inc.	-19.23%	—	—	—	—	—

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 × 966,198 ÷ 10,152,600 = 9.52%

⁴ Click competitor name to see calculations.

Analysis of economic value creation reveals a general trend of growth in economic profit and invested capital, characterized by periodic volatility in the economic spread ratio. Economic profit grew from $480,196 thousand in 2016 to a peak of $1,221,652 thousand in 2020, representing a substantial increase in value generated beyond the cost of capital, before experiencing a contraction to $966,198 thousand in 2021.

Economic Spread Ratio Trends: The economic spread ratio exhibited significant fluctuations, starting at 6.06% in 2016 and peaking at 12.75% in 2020. A sharp increase occurred between 2016 and 2017, with the ratio rising to 10.20%, followed by a slight correction to 8.88% in 2018. The subsequent climb to 12.75% indicates an optimization of the spread between the return on invested capital and the cost of that capital, though this efficiency declined to 9.52% by June 30, 2021.
Invested Capital Dynamics: Invested capital demonstrated a bifurcated trend over the analyzed period. Between 2016 and 2018, a gradual reduction was observed, with capital decreasing from $7,921,908 thousand to $7,289,794 thousand. Starting in 2019, a period of expansion commenced, with invested capital increasing to $9,463,158 thousand and continuing an upward trajectory to reach a period high of $10,152,600 thousand by 2021.
Correlation between Capital and Profit: Between 2019 and 2020, simultaneous growth in both invested capital and economic profit resulted in the highest economic spread ratio of the observed period. Conversely, the 2021 fiscal year is characterized by a divergence; while invested capital continued to expand, both economic profit and the economic spread ratio declined. This suggests a decrease in the marginal efficiency of the deployed capital during the final year of the sequence.

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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	966,198)	1,221,652)	1,013,443)	647,648)	767,357)	480,196)

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	6.45%	8.39%	7.18%	4.87%	6.19%	4.11%
Benchmarks
Economic Profit Margin, Competitors³
Accenture PLC	2.98%	3.26%	—	—	—	—
Adobe Inc.	11.17%	1.79%	—	—	—	—
AppLovin Corp.	-59.23%	—	—	—	—	—
Cadence Design Systems Inc.	6.91%	—	—	—	—	—
Datadog Inc.	-3.08%	—	—	—	—	—
International Business Machines Corp.	-11.82%	—	—	—	—	—
Intuit Inc.	0.14%	—	—	—	—	—
Microsoft Corp.	22.89%	—	—	—	—	—
Oracle Corp.	1.29%	—	—	—	—	—
Palantir Technologies Inc.	-65.82%	—	—	—	—	—
Palo Alto Networks Inc.	-6.95%	—	—	—	—	—
Salesforce Inc.	-28.34%	—	—	—	—	—
ServiceNow Inc.	1.68%	—	—	—	—	—
Synopsys Inc.	-10.92%	-11.45%	—	—	—	—
Workday Inc.	-25.09%	—	—	—	—	—

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 × 966,198 ÷ 14,988,600 = 6.45%

³ Click competitor name to see calculations.

The financial performance from June 30, 2016, to June 30, 2021, is characterized by a consistent expansion in adjusted revenues contrasted by volatility in economic profit and the resulting economic profit margin.

Revenue Growth Trend: Adjusted revenues exhibited a steady upward trajectory throughout the analyzed period, increasing from US$ 11,690,800 thousand in 2016 to US$ 14,988,600 thousand in 2021. This indicates a consistent growth in the scale of operations.
Economic Profit Volatility: Economic profit demonstrated significant fluctuations. An initial increase was observed in 2017, followed by a dip in 2018. A period of substantial growth occurred between 2019 and 2020, where economic profit reached a peak of US$ 1,221,652 thousand. However, this was followed by a contraction to US$ 966,198 thousand by June 30, 2021.
Economic Profit Margin Analysis: The economic profit margin mirrored the volatility of the absolute economic profit figures. The margin rose from 4.11% in 2016 to a peak of 8.39% in 2020. The subsequent decline to 6.45% in 2021, occurring despite the highest recorded adjusted revenues, suggests a decrease in the efficiency of generating value above the cost of capital during the final year of the period.

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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