Signal Ledger LabSignal Ledger valuation · ADP
Automatic Data Processing Inc
What the shares are worth today on our research (management’s own targets for each business): every line valued at the end of FY2030, net debt rolled forward, then discounted back to Jun 30, 2026.
- Business value at FY2030
- $118B
- FY2030 revenue
- $28B
- FY2030 EPS · P/E
- $16.79 · 19×
- Discount rate (WACC · equity)
- 8.09% · 8.30%
Latest quarter in this research: Q4 FY2026
Reported Jul 29, 2026 for the quarter to Jun 30, 2026 (company release ↗). This valuation already reflects these results (researched Oct 23, 2026).
| Segment | Revenue | vs a year ago | Operating income | Margin |
|---|---|---|---|---|
| Employer Services | $3.70B | +7% | — | — |
| PEO Services | $1.78B | +7% | — | — |
| Other | −$2M | — | — | — |
- Derived quarterly operating subtotal 1.2590B=5.4738B revenue-2.9625B cost of revenue-1.2523B SG&A, before funding interest and Other income. Segment pretax returns are not EBIT; segment operatingIncome fields stay null.
- FY2027 revenue 5-6%, adjusted EBIT margin expansion 70-90 bps; company also supplies GAAP pretax expansion 100-120 bps.
- Client funds interest already inside Employer Services; client cash 43.9578B is not corporate surplus cash or a separately valued financial holding.
What each business is worth
| Business | Model | FY2030 revenue | Value today | Per share | 2030 multiple | Value from beyond FY2030 |
|---|---|---|---|---|---|---|
| Employer Services | Margin | $19B | $96B | $242.34 | 14.3× EBIT | 65% |
| PEO Services | Margin | $9.4B | $20B | $50.88 | 14.3× EBIT | 67% |
| Company costsHead-office costs no segment carries, valued as one negative business | Cost line | — | −$11B | −$28.80 | — | 69% |
| All businesses | $28B | $105B | $264.42 |
From 2030 back to today
- Enterprise value at end of FY2030$118B
- Plus net cash at FY2030$11B
- Equity value at FY2030$129B
- ÷ (1 + 8.30%)^4.0 years at the cost of equity$94B
- + dividends paid on the way, discounted$9B
This reconciliation checks the published Signal Ledger valuation against the net-debt path. The difference is 1.5%, inside our 5% tolerance.
From businesses to one share
- All businesses, valued today$105B
- − borrowings$5B
- − finance leases$0B
- + cash and short-term investments$4.2B
- ÷ diluted shares0.397B
- Signal Ledger valuation$262.57
Year by year to FY2030
| Fiscal year | Revenue | EBITDA | Capex | Free cash flow | Net debt at year end |
|---|---|---|---|---|---|
| FY2027 | $23B | $6.9B | $0.7B | $4.7B | $1.3B cash |
| FY2028 | $25B | $7.5B | $0.7B | $5.2B | $3.9B cash |
| FY2029 | $26B | $8.3B | $0.8B | $5.7B | $7.1B cash |
| FY2030 | $28B | $9B | $0.8B | $6.2B | $11B cash |
What must be true
- Employer Services grows revenue from $15.6B in FY2027 to $18.6B in FY2030 (1.2×).
- PEO Services grows revenue from $7.6B in FY2027 to $9.4B in FY2030 (1.3×).
- Employer Services raises its EBIT margin from 37.8% to 40.7%.
- PEO Services raises its EBIT margin from 14.2% to 17.1%.
- The company spends $3.1B of capital expenditure through FY2030.
- Net debt peaks at $0.7B in FY2026 and stays financeable.
What the price implies
To reach $307.94 at our discount rate, Automatic Data Processing Inc would need about $33.3B of FY2030 sales (growth of about 10.9% a year from FY2026) with 32.7% GAAP EBIT margin — versus $28B and 32.7% GAAP EBIT margin in our research.
At the research price of $307.94 (2026-10-23), the price asks more than our assumptions overall. These are operating requirements at that price, not additional valuations or forecasts.
If sales and margins changed together
Each row matches the same research price at our unchanged discount rate, by scaling every operating line's margin by one common factor. Sales cover margin and capacity lines only; other valuation lines stay fixed. Margins are revenue-weighted within each metric, before separately modeled corporate costs and eliminations. The conclusion uses the row at our research margins when sales alone can match the price, otherwise the solved row needing the least sales growth; this is a trade-off between growth and profitability, not a forecast.
| FY2030 sales factor | FY2030 sales | FY2026–30 CAGR | Required FY2030 margin | Requirement |
|---|---|---|---|---|
| 1.19×At research margins | $33.3B | 10.9% | 32.7% GAAP EBIT | Within margin guardrails |
| 1.50× | $42B | 17.6% | 27.1% GAAP EBIT | Within margin guardrails |
| 2.00× | $56B | 26.4% | 21.7% GAAP EBIT | Within margin guardrails |
| 3.00× | $84B | 39.8% | 16.0% GAAP EBIT | Within margin guardrails |
CAGR uses $22B of same-scope FY2026 sales from the published model or its sourced research base, over four fiscal years. “Within margin guardrails” checks numeric limits only, not commercial plausibility. Each line and year must stay at or below 50.0% GAAP EBIT and 100% EBITDA, or our research margin where that is higher; capacity EBIT uses the engine's equipment depreciation. Unsolved margins are not extrapolated.
- Implied discount rate
- 7.2%
- All-business FY2030 sales factor
- 1.19×
The WACC that makes model value equal the price, shifting WACC and cost of equity by the same amount. Model: 8.1% WACC · 8.3% cost of equity.
FY2030 revenue would need to reach $33.3B (model: $28B) across the margin and capacity businesses. FY1 stays fixed; the sales change ramps to FY2030 and stays at that factor thereafter.
If only one business changed
Businesses with margin or capacity revenue paths, ordered by value today. Revenue and margin are separate alternatives; these requirements are not added together.
Employer Services
- Revenue alone
- FY2030 revenue would need to reach $22.5B (model: $18.6B).
- Margin alone
FY2030 EBIT margin would need to reach 48.1% (model: 40.7%).
PEO Services
- Revenue alone
- FY2030 revenue would need to reach $20.3B (model: $9.4B).
- Margin alone
FY2030 EBIT margin would need to reach 31.5% (model: 17.1%).
Mechanical requirements, not forecasts. The separate sales-only and single-business factors are searched from 0.1× to 6×; an unsolved comparison means this business alone cannot get there within those bounds. Single-business revenue changes apply from FY2 onward; margin changes scale the full EBIT or EBITDA margin path. Mixed groups show revenue-weighted EBIT and EBITDA margins separately. Requirements above 100% are not feasible margins. Joint rows instead search non-negative uniform margin factors only up to the EBIT/EBITDA guardrails; the entire margin path scales, including post-FY2030 convergence. Sales and margins change together only in that table. The rate search runs from the largest terminal growth rate plus 0.5 percentage points to 30% WACC.
The discount rate
- Cost of equity
- 8.30%
- WACC
- 8.09%
- 10-year Treasury · model / spot
- 3.87% · 5.13%
r_f 3.87% (5-year average 10-year Treasury yield 3.87% (spot 5.13% on 2026-10-21)) + β 0.89 after Blume adjustment × 5%, rounded to 0.01% (1bp)
methodology §4.5: market-weighted WACC, not rounded
The model uses the recorded 5-year average Treasury yield. The spot yield is shown for context.
Every input, with its source
Show 45 inputs · reported, guidance and rule-based
| Input | Value | Basis | Why |
|---|---|---|---|
| Revenue FY2027Employer Services | $15.6B | Guidance | target (methodology §4.2), growth 5.5% s205.q4cdn.com ↗ |
| Revenue FY2030Employer Services | $18.6B | Guidance | hold moderate (methodology §4.2), growth 5.8% s205.q4cdn.com ↗ |
| EBIT margin FY2030Employer Services | 40.7% | Rule | linear path to 40.7% by FY2030 (§4.3 E2: 4.0000 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 5.8% to FY2030; no cited expansion evidence) s205.q4cdn.com ↗ |
| Maintenance capexEmployer Services | 3.0% | Reported | Full cashflow capex.1966B plus additions to intangibles.4685B / revenue 21.9474B=3.0304%; software must be replaced. Narrative capex.1957B differs by.9M, cashflow definition chosen consistently. sec.gov ↗ |
| Terminal growthEmployer Services | 2.0% | Rule | methodology §4.2 terminal growth for a mature line Valuation methodology §4.2 · Read methodology ↗ |
| Revenue FY2027PEO Services | $7.6B | Guidance | target (methodology §4.2), growth 6.0% s205.q4cdn.com ↗ |
| Revenue FY2030PEO Services | $9.4B | Guidance | hold moderate (methodology §4.2), growth 7.7% s205.q4cdn.com ↗ |
| EBIT margin FY2030PEO Services | 17.1% | Rule | linear path to 17.1% by FY2030 (§4.3 E2: 4.0000 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 7.3% to FY2030; no cited expansion evidence) s205.q4cdn.com ↗ |
| Maintenance capexPEO Services | 3.0% | Reported | Full cashflow capex.1966B plus additions to intangibles.4685B / revenue 21.9474B=3.0304%; software must be replaced. Narrative capex.1957B differs by.9M, cashflow definition chosen consistently. sec.gov ↗ |
| Terminal growthPEO Services | 2.0% | Rule | methodology §4.2 terminal growth for a mature line Valuation methodology §4.2 · Read methodology ↗ |
| Share of revenue FY2027Company costs | 2.7% | Rule | Annual cost baseline $0.595B; scales with operating revenue; full reconciliation in research sec.gov ↗ |
| Share of revenue FY2034Company costs | 2.7% | Rule | Annual cost baseline $0.595B; scales with operating revenue; full reconciliation in research sec.gov ↗ |
| WACCDiscount rates | 8.09% | Rule | methodology §4.5: market-weighted WACC, not rounded FRED DGS10 2021-10-20..2026-10-21 |
| Cost of equityDiscount rates | 8.30% | Rule | r_f 3.87% (5-year average 10-year Treasury yield 3.87% (spot 5.13% on 2026-10-21)) + β 0.89 after Blume adjustment × 5%, rounded to 0.01% (1bp) 60 monthly returns vs SPY, 2021-09..2026-09 (adjusted closes) |
| Tax rateDiscount rates | 23.0% | Guidance | FY2027 GAAP effective tax 23% as well as adjusted 23% in explicit guidance reconciliation; applicable to GAAP EBIT. sec.gov ↗ |
| Revenue eliminated FY2027Consolidation | $12.1M | Rule | FY2027: hold FY2026 Other/intercompany net revenue elimination 12.1M constant; no duplicate PEO pass-through elimination. sec.gov ↗ |
| Revenue eliminated FY2028Consolidation | $12.1M | Rule | FY2028: hold FY2026 Other/intercompany net revenue elimination 12.1M constant; no duplicate PEO pass-through elimination. sec.gov ↗ |
| Revenue eliminated FY2029Consolidation | $12.1M | Rule | FY2029: hold FY2026 Other/intercompany net revenue elimination 12.1M constant; no duplicate PEO pass-through elimination. sec.gov ↗ |
| Revenue eliminated FY2030Consolidation | $12.1M | Rule | FY2030: hold FY2026 Other/intercompany net revenue elimination 12.1M constant; no duplicate PEO pass-through elimination. sec.gov ↗ |
| Revenue eliminated FY2031Consolidation | $12.1M | Rule | FY2031: hold FY2026 Other/intercompany net revenue elimination 12.1M constant; no duplicate PEO pass-through elimination. sec.gov ↗ |
| Revenue eliminated FY2032Consolidation | $12.1M | Rule | FY2032: hold FY2026 Other/intercompany net revenue elimination 12.1M constant; no duplicate PEO pass-through elimination. sec.gov ↗ |
| Revenue eliminated FY2033Consolidation | $12.1M | Rule | FY2033: hold FY2026 Other/intercompany net revenue elimination 12.1M constant; no duplicate PEO pass-through elimination. sec.gov ↗ |
| Revenue eliminated FY2034Consolidation | $12.1M | Rule | FY2034: hold FY2026 Other/intercompany net revenue elimination 12.1M constant; no duplicate PEO pass-through elimination. sec.gov ↗ |
| Profit eliminated FY2027Consolidation | $0.0B | Rule | FY2027: internal profit already in the sourced Other corporate-cost net bridge; no second profit elimination. sec.gov ↗ |
| Profit eliminated FY2028Consolidation | $0.0B | Rule | FY2028: internal profit already in the sourced Other corporate-cost net bridge; no second profit elimination. sec.gov ↗ |
| Profit eliminated FY2029Consolidation | $0.0B | Rule | FY2029: internal profit already in the sourced Other corporate-cost net bridge; no second profit elimination. sec.gov ↗ |
| Profit eliminated FY2030Consolidation | $0.0B | Rule | FY2030: internal profit already in the sourced Other corporate-cost net bridge; no second profit elimination. sec.gov ↗ |
| Profit eliminated FY2031Consolidation | $0.0B | Rule | FY2031: internal profit already in the sourced Other corporate-cost net bridge; no second profit elimination. sec.gov ↗ |
| Profit eliminated FY2032Consolidation | $0.0B | Rule | FY2032: internal profit already in the sourced Other corporate-cost net bridge; no second profit elimination. sec.gov ↗ |
| Profit eliminated FY2033Consolidation | $0.0B | Rule | FY2033: internal profit already in the sourced Other corporate-cost net bridge; no second profit elimination. sec.gov ↗ |
| Profit eliminated FY2034Consolidation | $0.0B | Rule | FY2034: internal profit already in the sourced Other corporate-cost net bridge; no second profit elimination. sec.gov ↗ |
| fiscalYearHistorical accounting reconciliation | FY2026 | Reported | FY2026 equations 21.9595-.0121=21.9474;6.3729-.5945-.0481=5.7303B; interest-net.0481=.1410-.0929, per non-GAAP guidance reconciliation. sec.gov ↗ |
| grossRevenueBHistorical accounting reconciliation | $22.0B | Reported | FY2026 equations 21.9595-.0121=21.9474;6.3729-.5945-.0481=5.7303B; interest-net.0481=.1410-.0929, per non-GAAP guidance reconciliation. sec.gov ↗ |
| revenueEliminationsBHistorical accounting reconciliation | $12.1M | Reported | FY2026 equations 21.9595-.0121=21.9474;6.3729-.5945-.0481=5.7303B; interest-net.0481=.1410-.0929, per non-GAAP guidance reconciliation. sec.gov ↗ |
| consolidatedRevenueBHistorical accounting reconciliation | $21.9B | Reported | FY2026 equations 21.9595-.0121=21.9474;6.3729-.5945-.0481=5.7303B; interest-net.0481=.1410-.0929, per non-GAAP guidance reconciliation. sec.gov ↗ |
| segmentProfitBHistorical accounting reconciliation | $6.4B | Reported | FY2026 equations 21.9595-.0121=21.9474;6.3729-.5945-.0481=5.7303B; interest-net.0481=.1410-.0929, per non-GAAP guidance reconciliation. sec.gov ↗ |
| profitEliminationsBHistorical accounting reconciliation | $0.0B | Reported | FY2026 equations 21.9595-.0121=21.9474;6.3729-.5945-.0481=5.7303B; interest-net.0481=.1410-.0929, per non-GAAP guidance reconciliation. sec.gov ↗ |
| corporateCostsBHistorical accounting reconciliation | $0.6B | Rule | FY2026 equations 21.9595-.0121=21.9474;6.3729-.5945-.0481=5.7303B; interest-net.0481=.1410-.0929, per non-GAAP guidance reconciliation. sec.gov ↗ |
| operatingInterestBHistorical accounting reconciliation | $48.1M | Reported | FY2026 equations 21.9595-.0121=21.9474;6.3729-.5945-.0481=5.7303B; interest-net.0481=.1410-.0929, per non-GAAP guidance reconciliation. sec.gov ↗ |
| consolidatedPretaxBHistorical accounting reconciliation | $5.7B | Reported | FY2026 equations 21.9595-.0121=21.9474;6.3729-.5945-.0481=5.7303B; interest-net.0481=.1410-.0929, per non-GAAP guidance reconciliation. sec.gov ↗ |
| Cash and short-term investmentsBalance sheet | $4.2B | Reported | cash, cash equivalents and short-term investments us-gaap:CashAndCashEquivalentsAtCarryingValue + us-gaap:MarketableSecuritiesCurrent · 0000008670-26-000030 (filed 2026-08-05) |
| BorrowingsBalance sheet | $5.0B | Reported | borrowings due within a year plus long-term borrowings us-gaap:DebtCurrent · 0000008670-26-000030 + us-gaap:LongTermDebtNoncurrent · 0000008670-26-000030 |
| Finance leasesBalance sheet | $0.0B | Reported | no finance lease liability reported balance sheet 2026-06-30 |
| SharesBalance sheet | 0.397B | Reported | shares outstanding as of 2026-07-31 cover page of 10-K 0000008670-26-000030 |
| Dividends per yearShareholders | $2.6B | Reported | FY2026 last four completed fiscal quarters declared common dividends 6.64/share, not forward quarterly 1.70*4. × 0.397B shares sec.gov ↗ |
Research notes
- share-count comparison: 0.4033B FY 2026-06-30 diluted average; point-in-time denominator retained
- unallocated company costs: $0.6B a year (2.7% of trailing revenue), growing with the lines, valued as one negative business
- cost of equity 8.30% (β 0.89 after Blume adjustment), WACC 8.1%
- Employer Services: FY2030 margin set to 40.7% instead of 38.8% (§4.3 E2: 4.0000 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 5.8% to FY2030; no cited expansion evidence)
- PEO Services: FY2030 margin set to 17.1% instead of 15.3% (§4.3 E2: 4.0000 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 7.3% to FY2030; no cited expansion evidence)
Signal Ledger research under one stated scenario — management's targets are delivered — not a forecast that they will be and not investment advice. The research desk (GPT-6.1 (Codex)) gathers filings, guidance and targets; deterministic code applies the samepublished rules to every company and checks the result. Inputs may contain errors; follow the source links before relying on them. Read our valuation methodology →