Enterprise Value to EBITDA (EV/EBITDA)
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
Automatic Data Processing Inc., EBITDA calculation
US$ in thousands
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).
An overall upward trajectory in profitability is observed from June 2016 to June 2021, characterized by significant growth in operating performance despite a temporary contraction in 2018.
- EBITDA Growth Patterns
- Earnings before interest, tax, depreciation and amortization increased from US$ 2,579,500 thousand in 2016 to US$ 3,931,600 thousand in 2021. A notable decline occurred in 2018, where EBITDA fell by approximately 9.4%, before a sharp recovery in 2019 with a 33.7% increase. Subsequent growth remained positive through 2020 and 2021, indicating a resilient capacity for earnings generation.
- Earnings Tier Correlation
- A consistent correlation is observed across all earnings metrics. Net earnings mirrored the EBITDA trend, rising from US$ 1,492,500 thousand in 2016 to US$ 2,598,500 thousand in 2021. The alignment between Earnings before tax (EBT), Earnings before interest and tax (EBIT), and EBITDA suggests that the drivers of profitability remained consistent throughout the period.
- Non-Cash Charge Analysis
- The difference between EBITDA and EBIT indicates a steady increase in depreciation and amortization expenses. These charges grew from US$ 288,600 thousand in 2016 to US$ 510,700 thousand in 2021. The gradual rise in these non-cash expenses suggests an expansion of the asset base or increased capital expenditure over the analyzed timeframe.
- Tax and Interest Impact
- The variance between EBIT and EBT remained relatively narrow, indicating that interest expenses or income did not fluctuate aggressively. Similarly, the gap between EBT and Net earnings shows a stable application of tax obligations relative to the growth in pre-tax profits.
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Enterprise Value to EBITDA Ratio, Current
Automatic Data Processing Inc., current EV/EBITDA calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 56,671,571) |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 3,931,600) |
| Valuation Ratio | |
| EV/EBITDA | 14.41 |
| Benchmarks | |
| EV/EBITDA, Competitors1 | |
| Accenture PLC | 10.74 |
| Adobe Inc. | 9.86 |
| AppLovin Corp. | 20.24 |
| Cadence Design Systems Inc. | 49.98 |
| Datadog Inc. | 497.73 |
| International Business Machines Corp. | 16.53 |
| Intuit Inc. | 12.39 |
| Microsoft Corp. | 19.15 |
| Oracle Corp. | 16.27 |
| Palantir Technologies Inc. | 276.72 |
| Palo Alto Networks Inc. | 231.05 |
| Salesforce Inc. | 15.19 |
| ServiceNow Inc. | 49.98 |
| Synopsys Inc. | 41.14 |
| Workday Inc. | 31.83 |
| EV/EBITDA, Sector | |
| Software & Services | 45.55 |
| EV/EBITDA, Industry | |
| Information Technology | 58.77 |
Based on: 10-K (reporting date: 2021-06-30).
1 Click competitor name to see calculations.
If the company EV/EBITDA is lower then the EV/EBITDA of benchmark then company is relatively undervalued.
Otherwise, if the company EV/EBITDA is higher then the EV/EBITDA of benchmark then company is relatively overvalued.
Enterprise Value to EBITDA Ratio, Historical
Automatic Data Processing Inc., historical EV/EBITDA 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) | |||||||
| Enterprise value (EV)1 | 55,220,578) | 31,348,038) | 43,666,032) | 31,507,210) | 21,429,404) | 5,880,787) | |
| Earnings before interest, tax, depreciation and amortization (EBITDA)2 | 3,931,600) | 3,769,700) | 3,544,500) | 2,651,400) | 2,927,200) | 2,579,500) | |
| Valuation Ratio | |||||||
| EV/EBITDA3 | 14.05 | 8.32 | 12.32 | 11.88 | 7.32 | 2.28 | |
| Benchmarks | |||||||
| EV/EBITDA, Competitors4 | |||||||
| Accenture PLC | 23.31 | — | — | — | — | — | |
| Adobe Inc. | 35.44 | 43.06 | — | — | — | — | |
| AppLovin Corp. | 30.05 | — | — | — | — | — | |
| Cadence Design Systems Inc. | 39.61 | — | — | — | — | — | |
| Datadog Inc. | 1,949.67 | — | — | — | — | — | |
| International Business Machines Corp. | 12.53 | — | — | — | — | — | |
| Intuit Inc. | 51.96 | — | — | — | — | — | |
| Microsoft Corp. | 24.59 | — | — | — | — | — | |
| Oracle Corp. | 13.78 | — | — | — | — | — | |
| Palantir Technologies Inc. | — | — | — | — | — | — | |
| Palo Alto Networks Inc. | — | — | — | — | — | — | |
| Salesforce Inc. | 33.83 | — | — | — | — | — | |
| ServiceNow Inc. | 147.45 | — | — | — | — | — | |
| Synopsys Inc. | 53.43 | 42.24 | — | — | — | — | |
| Workday Inc. | 670.04 | — | — | — | — | — | |
| EV/EBITDA, Sector | |||||||
| Software & Services | 25.74 | — | — | — | — | — | |
| EV/EBITDA, Industry | |||||||
| Information Technology | 20.52 | — | — | — | — | — | |
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).
3 2021 Calculation
EV/EBITDA = EV ÷ EBITDA
= 55,220,578 ÷ 3,931,600 = 14.05
4 Click competitor name to see calculations.
The financial trajectory between June 30, 2016, and June 30, 2021, is characterized by a substantial expansion in market valuation relative to operational earnings. While both Enterprise Value and EBITDA exhibited overall growth, the pace of valuation increase significantly outstripped the growth of underlying earnings, leading to a marked rise in the valuation multiple.
- Enterprise Value Trends
- A significant upward trend in Enterprise Value is observed, rising from 5,880,787 thousand USD in 2016 to a peak of 55,220,578 thousand USD in 2021. This growth was non-linear, featuring a sharp increase between 2016 and 2019, a contraction in 2020 to 31,348,038 thousand USD, and a subsequent recovery to the period high in 2021.
- Operational Earnings Performance
- EBITDA demonstrated a steady and consistent growth pattern, increasing from 2,579,500 thousand USD in 2016 to 3,931,600 thousand USD in 2021. Despite a minor dip in 2018 to 2,651,400 thousand USD, the general trend indicates a stable improvement in operational profitability over the six-year period.
- EV/EBITDA Ratio Dynamics
- The EV/EBITDA ratio experienced a dramatic increase, moving from 2.28 in 2016 to 14.05 in 2021. The ratio expanded rapidly through 2019, reaching 12.32, before declining to 8.32 in 2020. The sharp rise to 14.05 by June 30, 2021, suggests a significant premium attributed to the enterprise's value relative to its current cash flow generation capacity at the end of the analyzed period.
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