A Big Upgrade for Automatic Data Processing

After spending much of the past year at a respectable four-star rank, ADP (Nasdaq: ADP  ) has impressed enough top-performing members of our 170,000-strong Motley Fool CAPS community to take it to the top level of five stars. A total of 971members have given their opinion on the business solutions firm, with many of them offering analysis and commentary explaining the recent optimism.

Similar to peers Administaff (NYSE: ASF  ) and Paychex (Nasdaq: PAYX  ) , ADP has been working hard to maintain business in a challenging employment environment. But the company has seen signs of stabilization trends and recently entered its new fiscal year with some solid sales momentum. It saw strong new business sales in its employer services and professional employer organization (PEO) services segments with each segment posting sales growth in its fiscal fourth quarter. Despite the weakness in the labor market, many CAPS members believe ADP's strong balance sheet and solid position in its industry have it on a path of long-term growth.

ADP's dealer services segment has been picking up market share in key international markets like China and the Middle East, as well. While automaker customers such as Ford (NYSE: F  ) and Toyota (NYSE: TM  ) posted declining U.S. August sales numbers compared to the government-subsidized sales numbers of last year, China and other emerging markets are seeing big growth. ADP is positioning itself to benefit here with recently inked deals with Chrysler China and a major South African dealer group.

ADP has been active refocusing internally as well. It's been investing resources in its various businesses. It recently completed acquisitions of Workscape and Cobalt, and inked an agreement to buy one of its dealer services distributors, PACC, in the Middle East. Cobalt and PACC are expected to boost its dealer services presence and Workscape will help it compete for larger benefit solutions deals.

And while investors won't find a dividend payout from other companies in the software and services sector such as Cognizant (Nasdaq: CTSH  ) and Citrix Systems (Nasdaq: CTXS  ) , CAPS members are big fans of ADP's strong dividend history, which includes increasing its payout for 35 consecutive years.

Do you think ADP deserves its raised status? Add your thoughts in the comments box below on this page, or head over to CAPS to rate the company and check out all the information and opinions the community offers, absolutely free.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 67 points on average, take a free 30-day trial.

Fool contributor Dave Mock recently upgraded his checkers aptitude from dismal to passable. He owns no shares of companies mentioned here. Paychex is an Inside Value recommendation. Ford Motor is a Stock Advisor pick. Automatic Data Processing and Paychex are Income Investor choices.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool's disclosure policy now has a $2 limit on the money it can bring to school for a snack on Nacho Tuesdays.


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