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Analysts wrote in a note, “ADP continues to close the organic growth gap vs. HCM disruptors. While these ‘disruptors’ still grow faster than ADP, the spread is the lowest it has been in years – about 500bps narrower vs. history – suggesting improved execution on ADP’s side.”
In the first half of 2023, ADP disclosed a remarkable +12% growth in Employment Services organically, showcasing a notable advancement compared to the combined +20-21% growth achieved by similar peers after accounting for the mix.
This presents a substantial shift from the previous years, namely CY21 and CY22, when ADP’s organic growth lagged behind its HCM counterparts by approximately an average of 1,500bps and 1,400bps respectively.
“Given ADP’s improved organic growth profile and structurally high margin business, we believe its set of comps needs to include other high-quality business services and info services companies that have proven to be resilient over multiple years,” added the analysts.
“We believe names like: FDS, TRI, FICO, EFX, VRSK, MCO, SPGI, ROL, and CTAS all fit those characteristics.”
Shares of ADP are down 0.32% in afternoon trading Thursday.
