Reasons Why You Should Hold ADP Stock in Your Portfolio for Now

ADP’s ADP growth is driven by strong demand for its cloud-based Human Capital Management (“HCM”) technology solutions and Professional Employer Organization Services. Its recent acquisitions and transformative innovations are strengthening its access to diversified and high-growth markets.

The company’s third-quarter fiscal 2026 earnings are expected to increase 7.8% year over year. Its fiscal 2026 and 2027 earnings are anticipated to rise 9.5% and 10%, respectively. Revenues are expected to grow 6% in fiscal 2026 and 5.6% in fiscal 2027.

Factors That Bode Well for ADP

ADP’s revenue growth is fueled by the strong demand for payroll, talent management, human resources and benefits administration, and time and attendance management services by organizations of all sizes and markets.

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The company’s three-tier business strategy enables it to sustain and strengthen its position as a leading HCM technology and services provider. ADP’s focus on delivering a complete suite of cloud-based HCM and HR outsourcing solutions is helping it gain access to diverse markets.

ADP pursues buyouts that complement the overall business mix. By acquiring Celergo, WorkMarket, Global Cash Card and The Marcus Buckingham Company, ADP has enhanced its global capabilities, diversified its offerings and strengthened its competitive positioning. The recent acquisition of WorkForce Software has improved the company’s HCM solutions suite.

The recently launched ADP Lyric, a full-suite HCM, is gaining popularity among organizations for its flexibility, intelligence and human-centric design, which enhances the employee, manager and practitioner experience.

The company is also accelerating DataCloud penetration and increasing investment in inside sales, mid-market migrations and service alignment through its ongoing transformation initiatives. These are helping ADP enhance innovation, improve operations and expand margins. During the second quarter of fiscal 2026, the company launched the ADP workforce suite through innovation, integrating its workforce management solution across its leading payroll and HR platforms.

ADP’s current ratio (a measure of liquidity) at the end of second-quarter fiscal 2026 was 1.03. Though lower than the industry average of 1.87, a current ratio of more than 1 indicates that the company can easily pay off its short-term obligations in the future.

A Risk for ADP

ADP has been witnessing a significant rise in its expenditures due to ongoing acquisitions and investments in its transformation projects. In fiscal 2025 and 2024, the metric increased 6.8% and 6.2%, respectively. The same had increased 8% and 10% in fiscal 2023 and 2022, respectively. The rising expense trend increases pressure on the company to continue investing in technology and talent while carefully balancing growth initiatives with profitability.

Zacks Rank & Stocks to Consider

ADP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A couple of better-ranked stocks in the industry are MongoDB, Inc. MDB and HubSpot, Inc. HUBS.

MongoDB flaunts a Zacks Rank #1 at present. MDB has a long-term earnings growth expectation of 24.3%. The company delivered a trailing four-quarter average earnings surprise of 69.3%.

HubSpot sports a Zacks Rank of 1 at present, with a long-term earnings growth expectation of 18.6%. HUBS beat earnings estimates in each of the trailing four quarters, delivering an average surprise of 3%.

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This article originally published on Zacks Investment Research (zacks.com).

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