ADP
Automatic Data Processing, Inc.
$225.31
Platform & Compounding FCF
50%
Two-stage FCF DCF
Mild
·
Conviction
Fair Value
Trading 0.4% below fair value
You pay
$225.31
Bear
$174.89
Fair
$226.26
Bull
$274.86
Bear
$174.89
-22.4%
5% stage 1 growth, 11% discount
Fair
$226.26
+0.4%
9% stage 1 growth, 11% discount
Bull
$274.86
+22.0%
11% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (9% base case)
Terminal Value % of EV
38%
Implied Market Multiple
20.0x
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $243.63 from 36 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $226.26 per share.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions