In today's world, most companies span several regions and sell across the world. As Foolish colleague Morgan Housel notes, 10 years ago, less than a third of S&P 500 revenue came from abroad. Today, that makes up half the S&P's sales and continues to grow.
And that number is growing. The truth is, investors regularly underestimate how much demand comes from abroad. More importantly, for large, multinational corporations that have already established a presence in their home markets, much of their future growth comes from abroad.
With that in mind, today we're looking at Automatic Data Processing (Nasdaq: ADP ) . We'll examine not only where its sales and earnings come from, but how its sales abroad have changed over time.
Where ADP's sales were five years ago
Five years ago, ADP collected 83% of its sales from the United States.
Source: S&P Capital IQ.
Where ADP's sales are today
Today, ADP still collects 80% of its sales within North America, but its overseas exposure is growing quickly.
|
Segment
|
5-Year Sales Growth
|
| United States |
40% |
| Europe |
60% |
| Canada |
44% |
| Other |
182% |
Source: S&P Capital IQ.
Of all regions, growth rates in the United States were the lowest. While the "Other" segment saw an explosive 182% growth rate, it also still accounts for just 3% of sales. From this perspective, ADP's greatest opportunity might be growth in an area like Europe that contributes only 12% of sales but has a large market of companies ready to use its business outsourcing solutions.
Competitor checkup
One last point to check is how ADP's footprint compares with some of its peers and industry rivals':
|
Company
|
Geography With Most Sales
|
Percent of Sales
|
| ADP |
United States |
80% |
| Paychex (Nasdaq: PAYX ) |
United States |
100%* |
| Intuit (Nasdaq: INTU ) |
United States |
95%-100%** |
| Total System Services (NYSE: TSS ) |
United States |
70% |
Source: S&P Capital IQ. *Paychex doesn't report sales by country, but has a subsidiary in Germany. **Intuit doesn't report sales by region but states that international sales are less than 5% of its total.
Compared with other industries, the outsourced business solutions sector doesn't have the same amount of international exposure. Part of the reason is that each country has such unique laws. While ADP's total of "only" 20% of sales might look unimpressive relative to other S&P 500 companies, the company is doing a great job of expanding relative to its peers.
Keep searching
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