We have already posted an analysis of ADP's financial results for the three months that ended 31 March 2009. This period was the third quarter of the company's fiscal 2009, which will end in June.
Our earlier evaluation of the March quarter was incomplete because ADP's press release did not include a Cash Flow Statement, and the published Balance Sheet had been significantly condensed. Since we didn't yet have all the data required to compute exact GCFR gauge scores, the scores we posted were based on a mix of actual and estimated data.
ADP subsequently filed a 10-Q quarterly report with a complete set of financial statements. We used the data in the 10-Q to update our evaluation. Changes to the analysis results are described below.
The 10-Q did not change our examination of the March quarter's Income Statement, including the comparison with our previously communicated expectations.
The additional data in the 10-Q merely reduced the Value and Overall gauges by one point each, relative to the preliminary analysis. The following are the updated gauge scores:
- Cash Management: 10 of 25 (down from 13 in December)
- Growth: 14 of 25 (down from 18)
- Profitability: 15 of 25 (down from 16)
- Value: 17 of 25 (up from 16)
- Overall: 59 of 100 (down from 63)
A handful of the financial metrics we estimated earlier did need to be adjusted to reflect the data in the 10-Q. For completeness, we repeat the tables below with revised figures highlighted in red text. An unrelated update to S&P 500 market data affected one ratio.
| Cash Management | March 2009 | 3 months prior | 12 months prior |
| Current Ratio (1) | 1.7 | 1.6 | 1.8 |
| LTD/Equity | 0.9% | 1.1% | 1.0% |
| Debt/CFO | 0.0 years | 0.0 years | 0.0 years |
| Inventory/CGS | N/A | N/A | N/A |
| Finished Goods/Inventory | N/A | N/A | N/A |
| Days of Sales Outstanding (DSO) | 45.2 days | 45.2 days | 44.6 days |
| Working Capital/Invested Capital | 37.8% | 35.3% | 39.8% |
| Cash Conversion Cycle Time (CCCT) | 36.4 days | 36.6 days | 34.7 days |
| Gauge Score (0 to 25) | 10 | 13 | 15 |
| Growth | March 2009 | 3 months prior | 12 months prior |
| Revenue growth (1) | 4.6% | 8.5% | 13.3% |
| Revenue/Assets (2) | 106% | 110% | 97% |
| CFO growth (1) | 8.4% | 32.8% | 2.4% |
| Net Income growth (1) | 6.9% | 11.2% | 16.6% |
| Gauge Score (0 to 25) | 14 | 18 | 18 |
2. Assets excludes Funds held for clients
| Profitability | March 2009 | 3 months prior | 12 months prior |
| Operating Expenses/Revenue | 79.8% | 80.1% | 80.1% |
| ROIC | 31.6% | 32.3% | 28.1% |
| Free Cash Flow/Invested Capital | 39.6% | 47.8% | 33.7% |
| Accrual Ratio | -0.3% | -3.4% | -3.0% |
| Gauge Score (0 to 25) | 15 | 16 | 15 |
| Value | March 2009 | 3 months prior | 12 months prior |
| P/E | 14.6 | 16.3 | 18.5 |
| P/E vs. S&P 500 P/E | 93% | 86% | 106% |
| PEG | 0.3 | 0.4 | 0.5 |
| Price/Revenue | 2.0 | 2.2 | 2.6 |
| Enterprise Value/Cash Flow (EV/CFO) | 10.1 | 10.0 | 13.8 |
| Gauge Score (0 to 25) | 18 | 16 | 12 |
| Overall | March 2009 | 3 months prior | 12 months prior |
| Gauge Score (0 to 100) | 59 | 63 | 58 |
Full disclosure: Long ADP at time of writing.
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