4D·

ADP: Durable Compounding from a Structural Moat

$ADP (-0,57 %)

Automatic Data Processing (ADP) is the backbone of payroll and human capital management for over 40 million workers worldwide. Its business is essential, regulated, and deeply embedded—creating a moat that few can replicate.


Financially, ADP is a model of consistency:


  • Revenue CAGR: ~7% over the past decade
  • EPS CAGR: ~12%
  • Margins: 48% gross, 26% operating, 20% net
  • Free Cash Flow Margin: 23%
  • ROE: 80%, ROCE: 50%
  • This combination of growth and efficiency is rare for a service company of its size.



The balance sheet is strong, with $7.8B in cash and only $1.4B in net debt. Dividend yield sits at 2.1%, with double-digit growth for over a decade.


Valuation is rich (P/E 29×), but justified by resilience: ADP’s recurring revenue, switching costs, and regulatory embedding make its position nearly unassailable. Scale, trust, and data form a network effect that deters disruption.


Investment thesis: ADP is not a cyclical tech play; it’s labor infrastructure—cash-rich, globally entrenched, and built to endure. A compounder suited for long-term holders seeking reliability, dividends, and quiet dominance.

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