Stock Analysis on Net
Stock Analysis on Net

Automatic Data Processing Inc. (NASDAQ:ADP)

$22.49

This company has been moved to the archive! The financial data has not been updated since April 29, 2022.

Return on Capital (ROC)

Microsoft Excel

Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.

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Return on Invested Capital (ROIC)

Automatic Data Processing Inc., ROIC calculation, comparison to benchmarks

Microsoft Excel
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
Selected Financial Data (US$ in thousands)
Net operating profit after taxes (NOPAT)1
Invested capital2
Performance Ratio
ROIC3
Benchmarks
ROIC, Competitors4
Accenture PLC
Adobe Inc.
Cadence Design Systems Inc.
CrowdStrike Holdings Inc.
Fair Isaac Corp.
International Business Machines Corp.
Intuit Inc.
Microsoft Corp.
Oracle Corp.
Palantir Technologies Inc.
Palo Alto Networks Inc.
Salesforce Inc.
ServiceNow Inc.
Synopsys Inc.
Workday Inc.

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 Invested capital. See details »

3 2021 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.

Net Operating Profit After Taxes (NOPAT)
The net operating profit after taxes exhibits an overall upward trend from 2016 to 2021, increasing from approximately 1.53 billion USD in 2016 to a peak of roughly 2.51 billion USD in 2020, followed by a slight decline to about 2.33 billion USD in 2021. This trend suggests enhanced operational profitability over the years, with the highest profitability achieved in 2020 before a marginal reduction in the last reported period.
Invested Capital
Invested capital displays a fluctuating pattern across the observed period. It initially decreased from around 7.92 billion USD in 2016 to approximately 7.29 billion USD in 2018, then sharply increased to about 9.46 billion USD in 2019. From there, it continued to grow, reaching roughly 10.15 billion USD in 2021. This upward trajectory in the latter years may indicate increased capital investment or asset acquisition to support business growth.
Return on Invested Capital (ROIC)
The return on invested capital generally maintains a strong performance level, starting at around 19.28% in 2016, rising to a peak of 26.19% in 2020, and then declining to 23.00% in 2021. ROIC reflects the efficiency of capital usage and profitability relative to the invested capital. The increase up to 2020 indicates improving capital efficiency, while the subsequent decrease suggests a moderate reduction in profitability relative to the capital employed.
Overall Analysis
Over the six-year period, the data shows that profitability metrics improved significantly up to 2020, with NOPAT and ROIC both reaching their highest levels. Invested capital initially declined but increased considerably starting in 2019, possibly reflecting strategic investments. The decline in both NOPAT and ROIC in 2021 points to a potential slowdown in profitability and capital efficiency, warranting further investigation into the underlying causes.

Decomposition of ROIC

Automatic Data Processing Inc., decomposition of ROIC

Microsoft Excel
ROIC = OPM1 × TO2 × 1 – CTR3
Jun 30, 2021 = × ×
Jun 30, 2020 = × ×
Jun 30, 2019 = × ×
Jun 30, 2018 = × ×
Jun 30, 2017 = × ×
Jun 30, 2016 = × ×

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 Operating profit margin (OPM). See calculations »

2 Turnover of capital (TO). See calculations »

3 Effective cash tax rate (CTR). See calculations »

Operating Profit Margin (OPM)
The operating profit margin exhibits an overall upward trend from 19.44% in 2016 to 22.37% in 2021. There is a noticeable dip to 16.45% in 2018, followed by a strong recovery and gradual improvement in subsequent years, reaching its peak in 2021.
Turnover of Capital (TO)
The turnover of capital showed a rising trend over the first three years, starting at 1.48 in 2016 and peaking at 1.83 in 2018. However, from 2019 onward, it declined and stabilized around 1.48-1.52, indicating a slight decrease in the efficiency of capital utilization after 2018.
1 – Effective Cash Tax Rate (CTR)
This rate climbed steadily from 67.22% in 2016 to a high point of 78.33% in 2020, indicating an increasing proportion of earnings remaining after cash taxes in those years. In 2021, this ratio declined significantly to 69.63%, suggesting a change in tax expense or cash tax management during that period.
Return on Invested Capital (ROIC)
The return on invested capital improved from 19.28% in 2016 to a peak of 26.19% in 2020, reflecting increasing profitability on capital invested. However, it decreased in 2021 to 23%, showing some decline in capital efficiency or profitability in the most recent year evaluated.

Operating Profit Margin (OPM)

Automatic Data Processing Inc., OPM calculation, comparison to benchmarks

Microsoft Excel
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
Selected Financial Data (US$ in thousands)
Net operating profit after taxes (NOPAT)1
Add: Cash operating taxes2
Net operating profit before taxes (NOPBT)
 
Revenues
Add: Increase (decrease) in deferred revenues
Adjusted revenues
Profitability Ratio
OPM3
Benchmarks
OPM, Competitors4
Accenture PLC
Adobe Inc.
Cadence Design Systems Inc.
CrowdStrike Holdings Inc.
Fair Isaac Corp.
International Business Machines Corp.
Intuit Inc.
Microsoft Corp.
Oracle Corp.
Palantir Technologies Inc.
Palo Alto Networks Inc.
Salesforce Inc.
ServiceNow Inc.
Synopsys Inc.
Workday Inc.

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 Cash operating taxes. See details »

3 2021 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenues
= 100 × ÷ =

4 Click competitor name to see calculations.

Net Operating Profit Before Taxes (NOPBT)
The NOPBT demonstrated a generally increasing trend over the analyzed period, rising from approximately 2,272 million USD in June 2016 to about 3,353 million USD in June 2021. There was a noticeable dip in 2018, where the NOPBT decreased to approximately 2,189 million USD from 2,566 million USD in 2017, but this was followed by significant recovery and growth in the subsequent years, peaking in 2021.
Adjusted Revenues
Revenues exhibited consistent growth throughout the entire period, increasing from approximately 11,691 million USD in June 2016 to nearly 14,989 million USD in June 2021. The growth rate appears steady year-over-year, indicating sustained expansion in business activities or market share without any decline during the period.
Operating Profit Margin (OPM)
The operating profit margin experienced some fluctuations but overall showed improvement. Starting at 19.44% in June 2016, it increased to 20.71% in 2017 before declining to 16.45% in 2018. After this decline, the margin improved significantly to reach 22.37% by June 2021, surpassing all prior values. This suggests enhanced operational efficiency or cost control in later years despite the earlier downturn.
Summary of Trends
The data reveals a resilient financial performance marked by increasing adjusted revenues and net operating profits, notwithstanding the short-term setback in 2018. The operating profit margin dip in 2018 suggests higher costs or operational challenges during that year, but the subsequent recovery and margin expansion indicate effective management responses and improved profitability. Overall, the company demonstrated growth in scale and efficiency from 2016 to 2021.

Turnover of Capital (TO)

Automatic Data Processing Inc., TO calculation, comparison to benchmarks

Microsoft Excel
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
Selected Financial Data (US$ in thousands)
Revenues
Add: Increase (decrease) in deferred revenues
Adjusted revenues
 
Invested capital1
Efficiency Ratio
TO2
Benchmarks
TO, Competitors3
Accenture PLC
Adobe Inc.
Cadence Design Systems Inc.
CrowdStrike Holdings Inc.
Fair Isaac Corp.
International Business Machines Corp.
Intuit Inc.
Microsoft Corp.
Oracle Corp.
Palantir Technologies Inc.
Palo Alto Networks Inc.
Salesforce Inc.
ServiceNow Inc.
Synopsys Inc.
Workday Inc.

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 Invested capital. See details »

2 2021 Calculation
TO = Adjusted revenues ÷ Invested capital
= ÷ =

3 Click competitor name to see calculations.

Revenue Trends
The adjusted revenues show a consistent upward trend over the six-year period. Starting at approximately $11.69 billion in mid-2016, revenues increased steadily each year, reaching about $14.99 billion by mid-2021. This represents a notable growth in revenue, indicating positive sales performance or service delivery expansion over time.
Invested Capital Analysis
The invested capital exhibits some variability across the years. Initially, there is a decreasing trend from around $7.92 billion in mid-2016 to approximately $7.29 billion in mid-2018. However, from mid-2018 onwards, there is a significant increase, peaking at over $10.15 billion in mid-2021. This suggests a phase of capital divestment followed by substantial reinvestment or acquisition of assets in the latter years.
Turnover of Capital (TO) Performance
The turnover of capital ratio indicates the efficiency in generating revenue from invested capital. The ratio increases from 1.48 in mid-2016 to a peak of 1.83 in mid-2018, reflecting improved capital efficiency during this period. Subsequently, the ratio declines to 1.49 in mid-2019 and remains relatively stable around 1.48 to 1.52 in the following years. This pattern aligns with the reduction and then increase of invested capital, implying that while capital investment grew in recent years, the efficiency in utilizing that capital did not continue to improve at the same pace.

Effective Cash Tax Rate (CTR)

Automatic Data Processing Inc., CTR calculation, comparison to benchmarks

Microsoft Excel
Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016
Selected Financial Data (US$ in thousands)
Net operating profit after taxes (NOPAT)1
Add: Cash operating taxes2
Net operating profit before taxes (NOPBT)
Tax Rate
CTR3
Benchmarks
CTR, Competitors4
Accenture PLC
Adobe Inc.
Cadence Design Systems Inc.
CrowdStrike Holdings Inc.
Fair Isaac Corp.
International Business Machines Corp.
Intuit Inc.
Microsoft Corp.
Oracle Corp.
Palantir Technologies Inc.
Palo Alto Networks Inc.
Salesforce Inc.
ServiceNow Inc.
Synopsys Inc.
Workday Inc.

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 Cash operating taxes. See details »

3 2021 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =

4 Click competitor name to see calculations.

Cash Operating Taxes
The cash operating taxes show a fluctuating trend over the years. Starting at 744,765 thousand US dollars in 2016, the amount increased slightly in 2017 to 794,364 thousand US dollars. However, it declined significantly in 2018 to 559,875 thousand US dollars before rising again in 2019 to 713,664 thousand US dollars. There was a minor decrease in 2020 to 694,262 thousand US dollars, followed by a substantial increase in 2021 to 1,018,322 thousand US dollars, marking the highest level in the provided period.
Net Operating Profit Before Taxes (NOPBT)
The net operating profit before taxes exhibited a generally upward trend with some variability. It began at 2,272,201 thousand US dollars in 2016 and increased to 2,566,210 thousand US dollars in 2017. In 2018, there was a decrease to 2,188,653 thousand US dollars, but the profit rebounded strongly in 2019 to 3,003,800 thousand US dollars. This upward trajectory continued with increases to 3,203,118 thousand US dollars in 2020 and 3,353,034 thousand US dollars in 2021, indicating growth in operating profitability over time.
Effective Cash Tax Rate (CTR)
The effective cash tax rate declined steadily from 32.78% in 2016 to 21.67% in 2020, suggesting enhanced tax efficiency or changes in tax structures or strategies over that period. However, in 2021, the tax rate increased significantly to 30.37%, approaching the levels seen at the beginning of the period. This reversal in trend marks a notable shift in tax incidence or related fiscal policies affecting the company.
Overall Analysis
The data illustrates an overall increase in operating profitability, as seen in the upward trend of net operating profit before taxes, with some fluctuations in intermediate years. Cash operating taxes, while variable, reached their peak in the final year, likely impacted by the increased tax rate in 2021. The effective cash tax rate shows a clear downward trend for most of the period, indicating potential tax optimization, but the marked increase in the last year necessitates further analysis to understand the causes. The interplay between rising net profits and fluctuating tax rates suggests evolving financial and tax management strategies throughout the timeframe.