Is Automatic Data Processing, Inc. overvalued or undervalued?

As of 30 July 2025, the valuation grade for Automatic Data Processing, Inc. has moved from fair to attractive, indicating a positive shift in its valuation outlook. The company appears to be undervalued, particularly when considering its strong performance metrics. The P/E ratio stands at 51, which is higher than the peer average of 45.48, while the EV to EBITDA ratio is 34.87 compared to the peer average of 31.13. Additionally, the PEG ratio is 5.70, suggesting that the stock may be priced high relative to its growth rate.
In comparison to its peers, Netflix, Inc. is deemed expensive with a P/E of 52.90, while Paychex, Inc. is fairly valued at a P/E of 27.39. Despite the recent underperformance against the S&P 500, with a 1-year return of 5.45% compared to the index's 17.14%, the long-term perspective shows a 5-year return of 115.37%, outpacing the S&P 500's 96.61%. This indicates that while the stock may be facing short-term challenges, its long-term growth potential remains strong.