Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Automatic Data Processing, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 6.0% to 8.2% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 65, DPO 5, DIO 60). At a 8.6% WACC with mid-year discounting, the terminal value (86% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 17.6x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $243.65 per share, suggesting ADP is undervalued by 18.9% at the current price of $204.86.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 5,049 | 5,341 | 5,654 | 6,118 | 6,619 | 6,784 |
| (−) Net Interest | 282 | 299 | 316 | 342 | 370 | 379 |
| (+) D&A | 473 | 490 | 506 | 525 | 556 | 570 |
| EBITDA | 5,804 | 6,130 | 6,476 | 6,984 | 7,545 | 7,734 |
| (−) Tax | 1,156 | 1,223 | 1,294 | 1,400 | 1,515 | — |
| (−) CapEx | 595 | 630 | 667 | 721 | 780 | — |
| (−) ΔWC | 2,160 | 322 | 346 | 511 | 553 | — |
| Free Cash Flow (FCF) | 1,893 | 3,956 | 4,170 | 4,352 | 4,697 | — |
| Peers' EBITDA Multiple | 17.6x | |||||
| Terminal Value | 136,423 | |||||
| WACC / Discount Rate | 8.64% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 1,816 | 3,493 | 3,389 | 3,256 | 3,234 | 90,129 |
| Enterprise Value | 105,317 | |||||
| Projection Period | 15,188 | 14.4% | ||||
| Terminal Value | 90,129 | 85.6% | ||||
| (−) Current Net Debt | 5,718 | |||||
| Equity Value | 99,599 | |||||
| (÷) Outstanding Shares | 409M | |||||
| Fair Price | $244 | +19.0% | ||||
| WACC \ EV/EBITDA Exit Multiple | 13.6x | 15.6x | 17.6x | 19.6x | 21.6x |
|---|---|---|---|---|---|
| 6.6% | $212 | $240 | $267 | $294 | $322 |
| 7.6% | $203 | $229 | $255 | $281 | $307 |
| 8.6% | $194 | $219 | $244 | $269 | $294 |
| 9.6% | $185 | $209 | $233 | $257 | $281 |
| 10.6% | $177 | $200 | $223 | $246 | $268 |
Current price: $204.86. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.