Automatic Data Processing: A Better Opportunity Will Likely Present Itself $ADP

Automatic Data Processing (NASDAQ:ADP) is the leader in global payroll and human resources outsourcing. ADP has shown strong growth in clients despite the rough times of the last few years. Their client count has risen from 810k+ in FY 2019 to 990k at the end of FY 2022.

ADP provides solutions for just about every kind of back-office roles that a business has. Those solutions allow businesses to focus on what matters most, improving their actual business' competitive positioning and growth opportunities, while outsourcing the more mundane, although still critical, things such as payroll.

ADP's solutions run the gamut of a business profile from support for freelancers and small businesses up to Fortune 100 companies. ADP also maintains a global presence with operations in 140 countries around the globe. That additional complexity to navigate multiple geographical jurisdictions gives ADP an advantage compared to smaller operations. That gives ADP a truly global opportunity set.

Their end market is very fragmented between companies doing it on their own as well as smaller competitors. ADP's previously mentioned scale and years of experience allow ADP to continue to thrive.

ADP's business is built around client satisfaction and once a client is onboarded they are likely to remain as evidenced by their 92%+ client retention rate for FY 2022. Those relationships are built on quality and consistency of service. As long as ADP performs to satisfactory levels they are likely to retain their clients over time while being able to pass along incremental prices increases as the switching costs to a competitor are quite high. One quick way to anger your entire employee base is to mess up their paychecks.


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