American companies are burdened with the task of ensuring payrolls are processed smoothly and regulatory requirements related to employees are met sufficiently.

These processes can require hundreds of man hours and strict attention to detail, leading both small and large companies to work with workforce management firms to take care of payroll processing and regulatory compliance.

Automatic Data Processing (ADP) is a cloud-based workforce management firm that specializes in meeting these needs. And for decades, it has solidified itself as a major player in its industry.

By offering a wide range of offerings and catering to both small firms and large companies, the company has doubled its revenues from $11 billion in 2015 to nearly $21 billion in 2025.

Last year, it generated a Uniform ROA of 57% while achieving a Uniform asset growth of 40%. Yet despite this, it currently trades at a P/E of 21.4x, below corporate averages.

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As of late 2025, there are nearly 160 million nonfarm employees in the U.S. alone.

These employees are spread across millions of businesses ranging from multi-trillion juggernauts to small businesses with only a handful of employees.

Regardless of size, these businesses rely on effective payroll and human resource management to ensure employees are appropriately compensated for their work and operations run smoothly.

Automatic Data Processing (ADP) is a global leader in human capital management (“HCM”), providing cloud-based payroll and HR benefits to more than 1.1 million clients across 140 countries, covering more than 42 million employees.

Founded in 1949, the company has leveraged its expertise in this field to become the market leader in payroll processing across small-and-medium sized businesses and enterprise clients.

Today, ADP provides HCM services for more than 80% of the Fortune 500, and boasts a 92% revenue retention, translating in steady growth for the company as the world’s largest business growth.

Since 2015, the company’s revenue has grown 6.5% per year from $10.9 billion to $20.6 billion in 2025. 

Amidst the explosion of AI solutions and automated workflows ADP has remained on the frontier of HCM services, investing in technology including AI and agentic solutions.

And recently, it’s begun offering AI-powered solutions to clients for managing payroll and human resource functions such as time tracking and process optimization.

Thanks to its wide range of services and importance to most of the world’s largest companies, ADP has seen its Uniform return on assets (“ROA”) improve since 2021 after years of steady, 20%-30% returns—well above the 12% corporate average.

In 2025, the company posted 57% returns along with 40% asset growth.

Despite its profitability improvements over the past decade, investors are cautiously approaching this business amid a tenuous employment environment and concerns regarding intensifying HCM competition.

At current prices, ADP’s stock trades at a 21.4x Uniform P/E, slightly below historical levels. Given the company’s significant market share and retention rate, along with its robust revenue growth over the past decade, current valuations may be overly pessimistic.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research