Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Automatic Data Processing Inc., profitability ratios
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).
- Gross Profit Margin
- The gross profit margin exhibited relatively stable behavior over the six-year period, fluctuating marginally between 41.15% and 42.95%. A slight decline was observed from 2016 to 2018, followed by a notable increase in 2019. Subsequently, it experienced minor variations but remained above 42% in the last two recorded years, indicating consistent efficiency in core production or service operations.
- Operating Profit Margin
- Operating profit margin showed a clear upward trend throughout the timeframe. Starting at approximately 18.77% in 2016, it remained relatively flat until 2018, then increased significantly in 2019. Growth continued steadily into 2020 and 2021, reaching 22.16%, which suggests improved operational efficiency and better control over operating expenses over time.
- Net Profit Margin
- The net profit margin fluctuated more noticeably compared to gross and operating margins. After a moderate increase from 12.79% in 2016 to 14% in 2017, it declined in 2018 but rebounded strongly from 2019 onwards. The margin peaked at 17.32% in 2021, reflecting improved bottom-line profitability, likely driven by operational improvements and possibly favorable tax or financing conditions.
- Return on Equity (ROE)
- ROE exhibited substantial variability, with a significant jump from 33.3% in 2016 to nearly 47% in 2018. Although it decreased somewhat in 2019 and 2020, it recovered by 2021 to 45.83%. This pattern indicates strong overall shareholder value creation, albeit with some volatility likely linked to changes in net income or equity financing structures.
- Return on Assets (ROA)
- ROA increased steadily from 3.42% in 2016 to a peak of 6.3% in 2020, denoting improved asset utilization and profitability. However, there was a decline in 2021 to 5.33%, suggesting a slight reduction in efficiency with respect to asset management during the latest period, though still higher than the initial years.
Return on Sales
Return on Investment
Gross Profit Margin
Automatic Data Processing Inc., gross profit margin calculation, comparison to benchmarks
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Gross profit | 6,365,100) | 6,144,700) | 6,088,600) | 5,483,200) | 5,110,000) | 4,827,500) | |
| Revenues | 15,005,400) | 14,589,800) | 14,175,200) | 13,325,800) | 12,379,800) | 11,667,800) | |
| Profitability Ratio | |||||||
| Gross profit margin1 | 42.42% | 42.12% | 42.95% | 41.15% | 41.28% | 41.37% | |
| Benchmarks | |||||||
| Gross Profit Margin, Competitors2 | |||||||
| Accenture PLC | 32.38% | 31.53% | 30.81% | — | — | — | |
| Adobe Inc. | 88.18% | 86.62% | 85.03% | — | — | — | |
| Cadence Design Systems Inc. | 89.73% | 88.61% | — | — | — | — | |
| CrowdStrike Holdings Inc. | 73.75% | 70.58% | — | — | — | — | |
| Fair Isaac Corp. | 74.75% | 72.10% | 70.96% | — | — | — | |
| International Business Machines Corp. | 54.90% | 48.32% | — | — | — | — | |
| Intuit Inc. | 82.53% | 82.05% | 82.80% | — | — | — | |
| Microsoft Corp. | 68.93% | 67.78% | 65.90% | — | — | — | |
| Oracle Corp. | 80.59% | 79.68% | — | — | — | — | |
| Palantir Technologies Inc. | 77.99% | 67.74% | — | — | — | — | |
| Palo Alto Networks Inc. | 70.05% | 70.68% | 72.12% | — | — | — | |
| Salesforce Inc. | 74.41% | 75.23% | — | — | — | — | |
| ServiceNow Inc. | 77.05% | 78.16% | — | — | — | — | |
| Synopsys Inc. | 79.50% | 78.44% | 77.60% | — | — | — | |
| Workday Inc. | 72.25% | 70.63% | — | — | — | — | |
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).
1 2021 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenues
= 100 × 6,365,100 ÷ 15,005,400 = 42.42%
2 Click competitor name to see calculations.
- Revenue Growth
- The revenues of the company have demonstrated a consistent upward trend over the monitored period. Starting from approximately $11.67 billion in mid-2016, revenues increased steadily each year, reaching around $15.01 billion by mid-2021. This indicates a positive growth trajectory with an overall increase of about 28.6% across the five years.
- Gross Profit Trends
- Gross profit also shows a continuous increase throughout the years, rising from approximately $4.83 billion in 2016 to about $6.37 billion in 2021. The growth in gross profit aligns with the revenue growth, reflecting an expanding business scale or enhanced operational efficiency over time.
- Gross Profit Margin Analysis
- The gross profit margin experienced minor fluctuations during the period but remained relatively stable, ranging between 41.15% and 42.95%. After slight decreases in 2017 and 2018, the margin peaked at 42.95% in 2019, followed by a moderate decline and slight recovery in subsequent years, ending near 42.42% in 2021. This stability suggests effective management of direct costs relative to revenue despite changing business volumes.
- Summary
- Overall, the financial data indicates sustained business growth characterized by rising revenues and gross profits. The relatively stable gross profit margin implies consistent cost control and profitability at the gross level. The upward trends and margin stability collectively reflect a healthy operational performance over this five-year span.
Operating Profit Margin
Automatic Data Processing Inc., operating profit margin calculation, comparison to benchmarks
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Operating income | 3,324,600) | 3,141,700) | 3,024,400) | 2,511,700) | 2,326,800) | 2,190,500) | |
| Revenues | 15,005,400) | 14,589,800) | 14,175,200) | 13,325,800) | 12,379,800) | 11,667,800) | |
| Profitability Ratio | |||||||
| Operating profit margin1 | 22.16% | 21.53% | 21.34% | 18.85% | 18.80% | 18.77% | |
| Benchmarks | |||||||
| Operating Profit Margin, Competitors2 | |||||||
| Accenture PLC | 15.08% | 14.69% | 14.59% | — | — | — | |
| Adobe Inc. | 36.76% | 32.93% | 29.25% | — | — | — | |
| Cadence Design Systems Inc. | 26.07% | 24.06% | — | — | — | — | |
| CrowdStrike Holdings Inc. | -10.58% | -30.34% | — | — | — | — | |
| Fair Isaac Corp. | 38.40% | 22.86% | 21.86% | — | — | — | |
| International Business Machines Corp. | 11.97% | 9.22% | — | — | — | — | |
| Intuit Inc. | 25.95% | 28.34% | 27.33% | — | — | — | |
| Microsoft Corp. | 41.59% | 37.03% | 34.14% | — | — | — | |
| Oracle Corp. | 37.58% | 35.57% | — | — | — | — | |
| Palantir Technologies Inc. | -26.66% | -107.41% | — | — | — | — | |
| Palo Alto Networks Inc. | -7.15% | -5.25% | -1.87% | — | — | — | |
| Salesforce Inc. | 2.14% | 1.74% | — | — | — | — | |
| ServiceNow Inc. | 4.36% | 4.40% | — | — | — | — | |
| Synopsys Inc. | 17.48% | 16.83% | 15.48% | — | — | — | |
| Workday Inc. | -5.76% | -13.85% | — | — | — | — | |
| Operating Profit Margin, Sector | |||||||
| Software & Services | 28.21% | 24.17% | — | — | — | — | |
| Operating Profit Margin, Industry | |||||||
| Information Technology | 26.73% | 22.69% | — | — | — | — | |
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).
1 2021 Calculation
Operating profit margin = 100 × Operating income ÷ Revenues
= 100 × 3,324,600 ÷ 15,005,400 = 22.16%
2 Click competitor name to see calculations.
- Revenues
- Revenues show a consistent upward trend over the six-year period, increasing from approximately 11.67 billion USD in 2016 to over 15 billion USD in 2021. This steady increase suggests sustained business growth and an expanding market presence.
- Operating Income
- Operating income also demonstrates continuous growth, rising from around 2.19 billion USD in 2016 to 3.32 billion USD in 2021. The increase appears relatively proportional to revenue growth, indicating effective management of operating expenses in tandem with revenue expansion.
- Operating Profit Margin
- The operating profit margin displays a generally positive trajectory, moving from approximately 18.77% in 2016 to 22.16% in 2021. Notably, the margin exhibits a significant improvement starting from 2019 onward, indicating enhanced operational efficiency or improved cost control during this period.
- Overall Insights
- The data reflects a company with robust financial growth and improving profitability over time. Revenues and operating income steadily increase year over year, while the operating profit margin's upward trend points to strengthening operational performance. The marked improvement in margin from 2019 suggests strategic initiatives may have contributed to higher efficiency or more profitable revenue streams in recent years.
Net Profit Margin
Automatic Data Processing Inc., net profit margin calculation, comparison to benchmarks
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net earnings | 2,598,500) | 2,466,500) | 2,292,800) | 1,620,800) | 1,733,400) | 1,492,500) | |
| Revenues | 15,005,400) | 14,589,800) | 14,175,200) | 13,325,800) | 12,379,800) | 11,667,800) | |
| Profitability Ratio | |||||||
| Net profit margin1 | 17.32% | 16.91% | 16.17% | 12.16% | 14.00% | 12.79% | |
| Benchmarks | |||||||
| Net Profit Margin, Competitors2 | |||||||
| Accenture PLC | 11.69% | 11.52% | 11.06% | — | — | — | |
| Adobe Inc. | 30.55% | 40.88% | 26.42% | — | — | — | |
| Cadence Design Systems Inc. | 23.29% | 22.02% | — | — | — | — | |
| CrowdStrike Holdings Inc. | -10.59% | -29.45% | — | — | — | — | |
| Fair Isaac Corp. | 29.78% | 18.26% | 16.56% | — | — | — | |
| International Business Machines Corp. | 10.01% | 7.59% | — | — | — | — | |
| Intuit Inc. | 21.41% | 23.78% | 22.95% | — | — | — | |
| Microsoft Corp. | 36.45% | 30.96% | 31.18% | — | — | — | |
| Oracle Corp. | 33.96% | 25.94% | — | — | — | — | |
| Palantir Technologies Inc. | -33.75% | -106.75% | — | — | — | — | |
| Palo Alto Networks Inc. | -11.72% | -7.83% | -2.82% | — | — | — | |
| Salesforce Inc. | 19.16% | 0.74% | — | — | — | — | |
| ServiceNow Inc. | 3.90% | 2.62% | — | — | — | — | |
| Synopsys Inc. | 18.02% | 18.03% | 15.84% | — | — | — | |
| Workday Inc. | -6.54% | -13.25% | — | — | — | — | |
| Net Profit Margin, Sector | |||||||
| Software & Services | 25.30% | 20.05% | — | — | — | — | |
| Net Profit Margin, Industry | |||||||
| Information Technology | 23.62% | 19.67% | — | — | — | — | |
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).
1 2021 Calculation
Net profit margin = 100 × Net earnings ÷ Revenues
= 100 × 2,598,500 ÷ 15,005,400 = 17.32%
2 Click competitor name to see calculations.
- Net Earnings
- Net earnings exhibited a generally upward trend over the observed period, increasing from $1,492,500 thousand in June 2016 to $2,598,500 thousand in June 2021. A slight decline was noted in 2018 compared to 2017, with net earnings dropping from $1,733,400 thousand to $1,620,800 thousand. However, this was followed by a strong recovery and consistent growth in subsequent years, reaching the highest value in 2021.
- Revenues
- Revenues demonstrated steady growth throughout the period, rising from $11,667,800 thousand in June 2016 to $15,005,400 thousand in June 2021. The progression was consistent each year without any downturns, reflecting continuous expansion in the company's top line.
- Net Profit Margin
- The net profit margin showed an overall increasing pattern, starting at 12.79% in June 2016 and improving to 17.32% by June 2021. A notable dip occurred in 2018, where margin declined from 14% in 2017 to 12.16%, which corresponds with the decline in net earnings that year. Following this, there was a substantial increase in profitability margins, peaking at 17.32% in 2021, suggesting enhanced operational efficiency or favorable cost management relative to revenues.
- Summary of Trends
- The data indicates positive financial momentum, with revenues consistently increasing and net earnings and profit margins improving significantly after a brief setback in 2018. The recovery and subsequent growth in profitability margins following 2018 imply effective strategic adjustments or improved market conditions. The overall trajectory reflects strengthening financial performance and profitability over the reported years.
Return on Equity (ROE)
Automatic Data Processing Inc., ROE calculation, comparison to benchmarks
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net earnings | 2,598,500) | 2,466,500) | 2,292,800) | 1,620,800) | 1,733,400) | 1,492,500) | |
| Stockholders’ equity | 5,670,100) | 5,752,200) | 5,399,900) | 3,459,600) | 3,977,000) | 4,481,600) | |
| Profitability Ratio | |||||||
| ROE1 | 45.83% | 42.88% | 42.46% | 46.85% | 43.59% | 33.30% | |
| Benchmarks | |||||||
| ROE, Competitors2 | |||||||
| Accenture PLC | 30.25% | 30.05% | 33.17% | — | — | — | |
| Adobe Inc. | 32.59% | 39.66% | 28.03% | — | — | — | |
| Cadence Design Systems Inc. | 25.39% | 23.69% | — | — | — | — | |
| CrowdStrike Holdings Inc. | -10.64% | -19.10% | — | — | — | — | |
| Fair Isaac Corp. | — | 71.41% | 66.30% | — | — | — | |
| International Business Machines Corp. | 30.38% | 27.14% | — | — | — | — | |
| Intuit Inc. | 20.89% | 35.76% | 41.53% | — | — | — | |
| Microsoft Corp. | 43.15% | 37.43% | 38.35% | — | — | — | |
| Oracle Corp. | 262.43% | 83.94% | — | — | — | — | |
| Palantir Technologies Inc. | -22.71% | -76.61% | — | — | — | — | |
| Palo Alto Networks Inc. | -78.63% | -24.23% | -5.16% | — | — | — | |
| Salesforce Inc. | 9.81% | 0.37% | — | — | — | — | |
| ServiceNow Inc. | 6.22% | 4.18% | — | — | — | — | |
| Synopsys Inc. | 14.31% | 13.54% | 13.04% | — | — | — | |
| Workday Inc. | -8.62% | -19.33% | — | — | — | — | |
| ROE, Sector | |||||||
| Software & Services | 36.34% | 30.37% | — | — | — | — | |
| ROE, Industry | |||||||
| Information Technology | 42.48% | 35.75% | — | — | — | — | |
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).
1 2021 Calculation
ROE = 100 × Net earnings ÷ Stockholders’ equity
= 100 × 2,598,500 ÷ 5,670,100 = 45.83%
2 Click competitor name to see calculations.
- Net Earnings
- Net earnings exhibited a general upward trend over the six-year period. Starting at 1,492,500 thousand USD in 2016, there was a notable increase in 2017 to 1,733,400 thousand USD. Despite a slight decline in 2018 to 1,620,800 thousand USD, earnings significantly rose in 2019 to 2,292,800 thousand USD and continued to increase through 2020 and 2021, reaching 2,598,500 thousand USD. This pattern indicates strong profitability growth, especially from 2018 onwards.
- Stockholders’ Equity
- Stockholders' equity showed considerable fluctuations during the period. Initially, equity decreased from 4,481,600 thousand USD in 2016 to 3,459,600 thousand USD in 2018, indicating a contraction in shareholder investment or accumulation. However, the equity sharply increased in 2019 reaching 5,399,900 thousand USD and continued to rise slightly in 2020 to 5,752,200 thousand USD before slightly declining again in 2021 to 5,670,100 thousand USD. These movements suggest significant changes in the company’s capital structure or retained earnings over the years.
- Return on Equity (ROE)
- Return on equity values remained robust and generally high throughout the period, fluctuating between 33.3% and 46.85%. ROE increased markedly from 33.3% in 2016 to a peak of 46.85% in 2018, indicating enhanced efficiency in generating earnings from shareholder equity. Although it slightly decreased in 2019 to 42.46%, it remained stable and elevated around 42-46% through 2020 and 2021. This consistency confirms strong profitability relative to equity investment.
Return on Assets (ROA)
Automatic Data Processing Inc., ROA calculation, comparison to benchmarks
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net earnings | 2,598,500) | 2,466,500) | 2,292,800) | 1,620,800) | 1,733,400) | 1,492,500) | |
| Total assets | 48,772,500) | 39,165,500) | 41,887,700) | 37,088,700) | 37,180,000) | 43,670,000) | |
| Profitability Ratio | |||||||
| ROA1 | 5.33% | 6.30% | 5.47% | 4.37% | 4.66% | 3.42% | |
| Benchmarks | |||||||
| ROA, Competitors2 | |||||||
| Accenture PLC | 13.68% | 13.78% | 16.04% | — | — | — | |
| Adobe Inc. | 17.70% | 21.66% | 14.22% | — | — | — | |
| Cadence Design Systems Inc. | 15.87% | 14.95% | — | — | — | — | |
| CrowdStrike Holdings Inc. | -3.39% | -10.09% | — | — | — | — | |
| Fair Isaac Corp. | 25.01% | 14.72% | 13.40% | — | — | — | |
| International Business Machines Corp. | 4.35% | 3.58% | — | — | — | — | |
| Intuit Inc. | 13.29% | 16.70% | 24.78% | — | — | — | |
| Microsoft Corp. | 18.36% | 14.70% | 13.69% | — | — | — | |
| Oracle Corp. | 10.48% | 8.78% | — | — | — | — | |
| Palantir Technologies Inc. | -16.02% | -43.35% | — | — | — | — | |
| Palo Alto Networks Inc. | -4.87% | -2.95% | -1.24% | — | — | — | |
| Salesforce Inc. | 6.14% | 0.23% | — | — | — | — | |
| ServiceNow Inc. | 2.13% | 1.36% | — | — | — | — | |
| Synopsys Inc. | 8.66% | 8.27% | 8.31% | — | — | — | |
| Workday Inc. | -3.24% | -7.05% | — | — | — | — | |
| ROA, Sector | |||||||
| Software & Services | 12.29% | 9.68% | — | — | — | — | |
| ROA, Industry | |||||||
| Information Technology | 14.67% | 11.45% | — | — | — | — | |
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).
1 2021 Calculation
ROA = 100 × Net earnings ÷ Total assets
= 100 × 2,598,500 ÷ 48,772,500 = 5.33%
2 Click competitor name to see calculations.
The financial data over the six-year period reveals notable trends in profitability and asset management performance.
- Net Earnings
- Net earnings demonstrate an overall upward trajectory with some fluctuations. Beginning at approximately US$1.49 billion in 2016, earnings increased significantly to about US$1.73 billion in 2017, followed by a slight decline in 2018. From 2018 onwards, there was a strong recovery and consistent growth, peaking at nearly US$2.6 billion by 2021. This indicates improved profitability and effective operational performance over the latter years.
- Total Assets
- Total assets show variability without a consistent upward or downward trend. The asset base decreased from about US$43.7 billion in 2016 to approximately US$37.2 billion in 2017 and stabilized through 2018 and 2020 with minor fluctuations. A significant increase to over US$48.7 billion occurs in 2021, marking a substantial expansion in asset holdings. The variations suggest strategic adjustments in asset management or acquisitions in certain years.
- Return on Assets (ROA)
- Return on assets improved steadily from 3.42% in 2016 to peak at 6.3% in 2020, reflecting enhanced efficiency in utilizing assets to generate earnings. A slight decline to 5.33% in 2021 indicates a minor reduction in asset profitability but remains substantially higher than the initial years. This trend in ROA corresponds with the growth pattern noted in net earnings and the eventual rise in total assets.
Overall, the data indicates a strengthening financial position marked by increasing net earnings and improved asset efficiency up to 2020, supported by a significant asset base increase in 2021. The slight dip in ROA in the final year may warrant further analysis to determine the underlying causes.