Is Automatic Data Processing, Inc. overvalued or undervalued?

As of 17 October 2025, the valuation grade for Automatic Data Processing, Inc. has moved from expensive to attractive, indicating a shift towards a more favorable assessment of its value. The company appears to be undervalued, particularly when considering its P/E ratio of 51, which is higher than its peer, Paychex, Inc., at 27.39, and its EV to EBITDA ratio of 34.87, which also exceeds the peer average of 20.18. Additionally, the PEG ratio stands at 5.70, suggesting that the stock may be overvalued relative to its growth prospects.
In comparison to its peers, Automatic Data Processing, Inc. has a significantly higher ROCE of 73.05% and ROE of 68.23%, indicating strong profitability metrics. While the stock has underperformed against the S&P 500 in the short term, with a year-to-date return of -3.91% compared to the S&P 500's 13.30%, it has shown resilience over the longer term with a 5-year return of 89.51%, closely trailing the S&P 500's 91.29%. This suggests that while the stock may be undervalued currently, its strong fundamentals could support future growth.