Stock Analysis on Net
Stock Analysis on Net

Automatic Data Processing Inc. (NASDAQ:ADP)

This company has been moved to the archive! The financial data has not been updated since April 29, 2022.

DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin

Microsoft Excel

Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.

Two-Component Disaggregation of ROE

Automatic Data Processing Inc., decomposition of ROE

Microsoft Excel
ROE = ROA × Financial Leverage
Jun 30, 2021 45.83% = 5.33% × 8.60
Jun 30, 2020 42.88% = 6.30% × 6.81
Jun 30, 2019 42.46% = 5.47% × 7.76
Jun 30, 2018 46.85% = 4.37% × 10.72
Jun 30, 2017 43.59% = 4.66% × 9.35
Jun 30, 2016 33.30% = 3.42% × 9.74

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

The primary reason for the increase in return on equity ratio (ROE) over 2021 year is the increase in financial leverage ratio.

Three-Component Disaggregation of ROE

Automatic Data Processing Inc., decomposition of ROE

Microsoft Excel
ROE = Net Profit Margin × Asset Turnover × Financial Leverage
Jun 30, 2021 45.83% = 17.32% × 0.31 × 8.60
Jun 30, 2020 42.88% = 16.91% × 0.37 × 6.81
Jun 30, 2019 42.46% = 16.17% × 0.34 × 7.76
Jun 30, 2018 46.85% = 12.16% × 0.36 × 10.72
Jun 30, 2017 43.59% = 14.00% × 0.33 × 9.35
Jun 30, 2016 33.30% = 12.79% × 0.27 × 9.74

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

The primary reason for the increase in return on equity ratio (ROE) over 2021 year is the increase in financial leverage ratio.

Five-Component Disaggregation of ROE

Automatic Data Processing Inc., decomposition of ROE

Microsoft Excel
ROE = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover × Financial Leverage
Jun 30, 2021 45.83% = 0.77 × 0.98 × 22.80% × 0.31 × 8.60
Jun 30, 2020 42.88% = 0.77 × 0.97 × 22.55% × 0.37 × 6.81
Jun 30, 2019 42.46% = 0.76 × 0.96 × 22.12% × 0.34 × 7.76
Jun 30, 2018 46.85% = 0.75 × 0.95 × 17.06% × 0.36 × 10.72
Jun 30, 2017 43.59% = 0.68 × 0.97 × 21.09% × 0.33 × 9.35
Jun 30, 2016 33.30% = 0.67 × 0.98 × 19.63% × 0.27 × 9.74

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

The primary reason for the increase in return on equity ratio (ROE) over 2021 year is the increase in financial leverage ratio.

Two-Component Disaggregation of ROA

Automatic Data Processing Inc., decomposition of ROA

Microsoft Excel
ROA = Net Profit Margin × Asset Turnover
Jun 30, 2021 5.33% = 17.32% × 0.31
Jun 30, 2020 6.30% = 16.91% × 0.37
Jun 30, 2019 5.47% = 16.17% × 0.34
Jun 30, 2018 4.37% = 12.16% × 0.36
Jun 30, 2017 4.66% = 14.00% × 0.33
Jun 30, 2016 3.42% = 12.79% × 0.27

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

The primary reason for the decrease in return on assets ratio (ROA) over 2021 year is the decrease in asset turnover ratio.

Four-Component Disaggregation of ROA

Automatic Data Processing Inc., decomposition of ROA

Microsoft Excel
ROA = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover
Jun 30, 2021 5.33% = 0.77 × 0.98 × 22.80% × 0.31
Jun 30, 2020 6.30% = 0.77 × 0.97 × 22.55% × 0.37
Jun 30, 2019 5.47% = 0.76 × 0.96 × 22.12% × 0.34
Jun 30, 2018 4.37% = 0.75 × 0.95 × 17.06% × 0.36
Jun 30, 2017 4.66% = 0.68 × 0.97 × 21.09% × 0.33
Jun 30, 2016 3.42% = 0.67 × 0.98 × 19.63% × 0.27

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

The primary reason for the decrease in return on assets ratio (ROA) over 2021 year is the decrease in efficiency measured by asset turnover ratio.

Disaggregation of Net Profit Margin

Automatic Data Processing Inc., decomposition of net profit margin ratio

Microsoft Excel
Net Profit Margin = Tax Burden × Interest Burden × EBIT Margin
Jun 30, 2021 17.32% = 0.77 × 0.98 × 22.80%
Jun 30, 2020 16.91% = 0.77 × 0.97 × 22.55%
Jun 30, 2019 16.17% = 0.76 × 0.96 × 22.12%
Jun 30, 2018 12.16% = 0.75 × 0.95 × 17.06%
Jun 30, 2017 14.00% = 0.68 × 0.97 × 21.09%
Jun 30, 2016 12.79% = 0.67 × 0.98 × 19.63%

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

The primary reason for the increase in net profit margin ratio over 2021 year is the increase in effect of interest expense measured by interest burden ratio.