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 more favorable assessment of its market position. The company appears to be undervalued, particularly when considering its P/E ratio of 51, which is higher than the peer average of 45.48, and an EV to EBITDA ratio of 34.87 compared to the peer average of 31.13. Additionally, the PEG ratio stands at 5.70, which suggests that the stock may be priced high relative to its growth expectations.
In comparison to peers, Netflix, Inc. has a P/E of 52.90 and Paychex, Inc. has a P/E of 27.39, highlighting that Automatic Data Processing, Inc. is positioned competitively within its industry despite its higher valuation ratios. While the company has struggled 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 longer periods, with a 5-year return of 89.51%, closely trailing the S&P 500's 91.29%. This performance suggests that while the stock may currently be undervalued, its potential for growth remains strong.