ADP
Automatic Data Processing, Inc.
$241.92
Platform & Compounding FCF
50%
Two-stage FCF DCF
Mild
·
Conviction
Overvalued
Trading 6.5% above fair value
You pay
$241.92
Bear
$175.59
Fair
$227.16
Bull
$275.95
Bear
$175.59
-27.4%
5% stage 1 growth, 11% discount
Fair
$227.16
-6.1%
9% stage 1 growth, 11% discount
Bull
$275.95
+14.1%
11% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (9% base case)
Terminal Value % of EV
38%
Implied Market Multiple
21.4x
Market is pricing in (growth)
9.9%
vs 8.6% base
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 $246.63 from 36 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $227.16 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