Price to FCFE (P/FCFE)

Free Cash Flow to Equity (FCFE)
P to FCFE Ratio, Current
P to FCFE Ratio, Historical

Free Cash Flow to Equity (FCFE)

Automatic Data Processing Inc., FCFE 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)
Net noncash charges	1,432,200)	1,679,700)	1,601,300)	986,900)	490,800)	496,300)
Changes in operating assets and liabilities	(937,400)	(1,120,000)	(1,205,800)	(92,500)	(98,300)	(128,900)
Net cash flows provided by operating activities	3,093,300)	3,026,200)	2,688,300)	2,515,200)	2,125,900)	1,859,900)
Capital expenditures	(178,600)	(172,700)	(162,000)	(206,100)	(240,200)	(168,500)
Additions to intangibles	(327,300)	(443,700)	(404,500)	(264,700)	(230,400)	(217,500)
Payments of debt	(1,001,800)	(2,200)	(2,100)	(7,300)	(2,000)	(1,500)
Proceeds from the issuance of debt	1,981,500)	—)	—)	—)	—)	1,998,300)
Net proceeds (payments) related to reverse repurchase agreements	9,900)	(248,400)	262,000)	—)	—)	—)
Free cash flow to equity (FCFE)	3,577,000)	2,159,200)	2,381,700)	2,037,100)	1,653,300)	3,470,700)

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 indicates a consistent upward trajectory in net cash flows provided by operating activities, contrasted by a more volatile performance in free cash flow to equity (FCFE) over the six-year period ending June 30, 2021.

Operating Cash Flow Performance: A sustained growth pattern is observed in net cash flows from operating activities, which increased every year from 1,859,900 thousand US dollars in 2016 to 3,093,300 thousand US dollars in 2021. This represents a steady improvement in the company's ability to generate cash from its core business operations.
FCFE Volatility and Trends: Free cash flow to equity exhibits significant fluctuations. After a high of 3,470,700 thousand US dollars in 2016, FCFE experienced a sharp decline to 1,653,300 thousand US dollars in 2017. While a recovery trend followed between 2018 and 2019, a slight contraction occurred in 2020 before a substantial surge to 3,577,000 thousand US dollars in 2021.
Relationship Between Operating Cash Flow and FCFE: A divergence between operating cash flows and FCFE is evident. In 2016 and 2021, FCFE exceeded operating cash flows, suggesting potential inflows from financing activities or a reduction in capital expenditures. Conversely, from 2017 through 2020, FCFE remained below operating cash flows, indicating that a portion of operating cash was utilized for capital investments or debt repayments during those years.

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Price to FCFE Ratio, Current

Automatic Data Processing Inc., current P/FCFE calculation, comparison to benchmarks

No. shares of common stock outstanding	417,747,152
Selected Financial Data (US$)
Free cash flow to equity (FCFE) (in thousands)	3,577,000)
FCFE per share	8.56
Current share price (P)	218.18
Valuation Ratio
P/FCFE	25.48
Benchmarks
P/FCFE, Competitors¹
Accenture PLC	7.19
Adobe Inc.	8.86
AppLovin Corp.	26.52
Cadence Design Systems Inc.	56.60
Datadog Inc.	345.11
International Business Machines Corp.	14.70
Intuit Inc.	7.15
Microsoft Corp.	59.90
Oracle Corp.	25.09
Palantir Technologies Inc.	216.98
Palo Alto Networks Inc.	77.35
Salesforce Inc.	9.72
ServiceNow Inc.	30.94
Synopsys Inc.	5.51
Workday Inc.	16.44
P/FCFE, Sector
Software & Services	57.77
P/FCFE, Industry
Information Technology	80.72

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

¹ Click competitor name to see calculations.

If the company P/FCFE is lower then the P/FCFE of benchmark then company is relatively undervalued.
Otherwise, if the company P/FCFE is higher then the P/FCFE of benchmark then company is relatively overvalued.

Price to FCFE Ratio, Historical

Automatic Data Processing Inc., historical P/FCFE calculation, comparison to benchmarks

	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
No. shares of common stock outstanding¹	423,080,556	429,965,405	433,942,837	438,082,756	444,374,752	456,176,951
Selected Financial Data (US$)
Free cash flow to equity (FCFE) (in thousands)²	3,577,000)	2,159,200)	2,381,700)	2,037,100)	1,653,300)	3,470,700)
FCFE per share³	8.45	5.02	5.49	4.65	3.72	7.61
Share price^1, 4	212.00	134.77	167.73	134.25	111.39	89.67
Valuation Ratio
P/FCFE⁵	25.07	26.84	30.56	28.87	29.94	11.79
Benchmarks
P/FCFE, Competitors⁶
Accenture PLC	25.76	19.01	—	—	—	—
Adobe Inc.	34.26	41.36	—	—	—	—
AppLovin Corp.	22.51	—	—	—	—	—
Cadence Design Systems Inc.	36.31	—	—	—	—	—
Datadog Inc.	202.25	—	—	—	—	—
International Business Machines Corp.	48.45	—	—	—	—	—
Intuit Inc.	86.74	—	—	—	—	—
Microsoft Corp.	42.54	—	—	—	—	—
Oracle Corp.	8.36	—	—	—	—	—
Palantir Technologies Inc.	198.12	—	—	—	—	—
Palo Alto Networks Inc.	32.91	—	—	—	—	—
Salesforce Inc.	49.52	—	—	—	—	—
ServiceNow Inc.	64.54	—	—	—	—	—
Synopsys Inc.	40.55	45.07	—	—	—	—
Workday Inc.	40.57	—	—	—	—	—
P/FCFE, Sector
Software & Services	34.11	—	—	—	—	—
P/FCFE, Industry
Information Technology	27.39	—	—	—	—	—

¹ Data adjusted for splits and stock dividends.

² See details »

³ 2021 Calculation
FCFE per share = FCFE ÷ No. shares of common stock outstanding
= 3,577,000,000 ÷ 423,080,556 = 8.45

⁴ Closing price as at the filing date of Automatic Data Processing Inc. Annual Report.

⁵ 2021 Calculation
P/FCFE = Share price ÷ FCFE per share
= 212.00 ÷ 8.45 = 25.07

⁶ Click competitor name to see calculations.

The valuation metrics indicate a fundamental transition in market pricing between 2016 and 2021. A primary observation is the substantial expansion of the P/FCFE multiple, which shifted the asset from a relatively low valuation in 2016 to a significantly higher valuation floor in subsequent years.

Share Price Evolution: The share price exhibited a general upward trajectory, increasing from 89.67 USD in 2016 to 212.00 USD in 2021. A notable temporary contraction occurred in 2020, where the price declined to 134.77 USD before rebounding sharply in the final observed period.
Free Cash Flow to Equity (FCFE) per Share: FCFE per share experienced significant volatility early in the period. Following a value of 7.61 USD in 2016, there was a sharp decline to 3.72 USD in 2017. This was followed by a consistent recovery trend, eventually reaching a peak of 8.45 USD in 2021.
P/FCFE Ratio Dynamics: The P/FCFE ratio surged from 11.79 in 2016 to 29.94 in 2017, marking a distinct shift in the valuation multiple applied to the entity's cash flows. From 2017 through 2021, the ratio remained relatively stable, oscillating between a high of 30.56 and a low of 25.07. The gradual compression of the ratio from 2019 to 2021 is attributed to FCFE growth outpacing the increase in share price.