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).
- Net Earnings
- The net earnings demonstrated an overall upward trend from 2016 to 2021. Starting at 1,492,500 thousand USD in 2016, there was a steady increase reaching 2,598,500 thousand USD by 2021. Despite a slight decrease in 2018 compared to 2017, the growth resumed and was particularly notable between 2018 and 2019. This indicates improved profitability over the examined period.
- Earnings Before Tax (EBT)
- EBT showed fluctuations but maintained an increasing trajectory over the six-year span. Beginning at 2,234,700 thousand USD in 2016, it rose to 3,361,200 thousand USD in 2021. A decline was observed in 2018 relative to 2017, mirroring the trend seen in net earnings, but from 2019 onward, there was consistent growth. This suggests enhanced operational income before tax effects.
- Earnings Before Interest and Tax (EBIT)
- EBIT followed a pattern similar to EBT, increasing from 2,290,900 thousand USD in 2016 to 3,420,900 thousand USD in 2021. The dip in 2018 compared to the previous year was evident, yet subsequent years exhibited steady increases. This reflects greater operational efficiency and profitability excluding interest expenses and tax.
- Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)
- EBITDA values rose from 2,579,500 thousand USD in 2016 to 3,931,600 thousand USD in 2021. The trend included a decline in 2018 but recovered strongly thereafter. The growth in EBITDA highlights an improving operational cash flow and potentially stronger earnings quality, as this metric excludes non-cash charges.
- Overall Observations
- Across all earnings metrics examined (Net Earnings, EBT, EBIT, and EBITDA), there was a noticeable dip in 2018 followed by sustained and robust growth through 2021. The persistent increases from 2019 to 2021 suggest enhanced profitability and operational performance. The simultaneous growth in these measures points to consistent improvements in earnings generation, both on operational and after-tax levels.
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 | 13.46 |
| Adobe Inc. | 18.63 |
| Cadence Design Systems Inc. | 56.95 |
| CrowdStrike Holdings Inc. | 349.77 |
| Datadog Inc. | 157.19 |
| Fair Isaac Corp. | 45.06 |
| International Business Machines Corp. | 21.62 |
| Intuit Inc. | 44.07 |
| Microsoft Corp. | 24.11 |
| Oracle Corp. | 32.46 |
| Palantir Technologies Inc. | 797.24 |
| Palo Alto Networks Inc. | 91.00 |
| Salesforce Inc. | 20.28 |
| ServiceNow Inc. | 75.75 |
| Synopsys Inc. | 49.80 |
| Workday Inc. | 51.33 |
| EV/EBITDA, Sector | |
| Software & Services | 46.66 |
| EV/EBITDA, Industry | |
| Information Technology | 44.35 |
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 | 17.46 | 15.60 | — | — | — | |
| Adobe Inc. | 35.44 | 43.06 | 41.16 | — | — | — | |
| Cadence Design Systems Inc. | 39.61 | 45.75 | — | — | — | — | |
| CrowdStrike Holdings Inc. | — | — | — | — | — | — | |
| Datadog Inc. | 1,949.67 | 1,224.54 | — | — | — | — | |
| Fair Isaac Corp. | 21.71 | 42.84 | 35.93 | — | — | — | |
| International Business Machines Corp. | 12.53 | 12.28 | — | — | — | — | |
| Intuit Inc. | 51.96 | 35.70 | 34.27 | — | — | — | |
| Microsoft Corp. | 24.59 | 21.74 | — | — | — | — | |
| Oracle Corp. | 13.78 | 11.54 | — | — | — | — | |
| Palantir Technologies Inc. | — | — | — | — | — | — | |
| Palo Alto Networks Inc. | — | 349.99 | 117.18 | — | — | — | |
| Salesforce Inc. | 33.83 | 49.45 | — | — | — | — | |
| ServiceNow Inc. | 147.45 | 220.91 | — | — | — | — | |
| Synopsys Inc. | 53.43 | 42.24 | 26.98 | — | — | — | |
| Workday Inc. | 670.04 | — | — | — | — | — | |
| EV/EBITDA, Sector | |||||||
| Software & Services | 26.01 | 23.54 | — | — | — | — | |
| EV/EBITDA, Industry | |||||||
| Information Technology | 20.58 | 19.78 | — | — | — | — | |
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.
- Enterprise Value
- The enterprise value exhibited a significant upward trend from 2016 to 2021, with fluctuations in some years. Initially, it grew moderately from approximately $5.9 billion in 2016 to $21.4 billion in 2017. The upward trajectory continued, reaching a peak of about $43.7 billion in 2019. However, in 2020, a decline occurred, lowering the enterprise value to approximately $31.3 billion. In 2021, a sharp recovery took place, boosting the value substantially to around $55.2 billion, the highest point in the period analyzed.
- Earnings before Interest, Tax, Depreciation, and Amortization (EBITDA)
- EBITDA showed some volatility but maintained an overall increasing trend. Starting at roughly $2.58 billion in 2016, EBITDA increased to about $2.93 billion in 2017 but decreased slightly to $2.65 billion in 2018. It then rose steadily for the next three years, reaching approximately $3.54 billion in 2019, $3.77 billion in 2020, and finally $3.93 billion in 2021. This pattern indicates improving operating profitability, especially in the latter years of the period analyzed.
- EV/EBITDA Ratio
- The EV/EBITDA ratio exhibited considerable variation, reflecting changes in enterprise value relative to operating earnings. It increased sharply from 2.28 in 2016 to 7.32 in 2017 and continued rising to 11.88 in 2018 and 12.32 in 2019. This increasing trend suggests that enterprise value grew at a faster pace than EBITDA in this period. In 2020, the ratio decreased notably to 8.32, indicating that the enterprise value declined relative to EBITDA or that EBITDA increased at a higher rate. However, in 2021, the ratio surged again to 14.05, the highest in the six-year span, implying a substantial increase in enterprise value relative to EBITDA.
- Summary of Trends and Insights
- Overall, the enterprise value demonstrated strong growth with some cyclical declines, while EBITDA trends indicate an improvement in operational earnings over time. The EV/EBITDA ratio's fluctuations suggest changing market valuations relative to earnings, possibly reflecting shifts in investor expectations, market conditions, or company-specific factors influencing the valuation multiple. The high ratio in 2021 may warrant further examination regarding market optimism or potential overvaluation in that year.