Automatic Data Processing Inc (ADP)
Profitability ratios
Return on sales
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | |
|---|---|---|---|---|---|
| Gross profit margin | 50.84% | 49.94% | 48.89% | 46.86% | 46.48% |
| Operating profit margin | 26.32% | 25.74% | 25.02% | 23.05% | 22.16% |
| Pretax margin | 25.83% | 25.37% | 24.64% | 23.06% | 22.40% |
| Net profit margin | 19.84% | 19.54% | 18.94% | 17.87% | 17.32% |
The profitability ratios of Automatic Data Processing Inc. exhibit a consistent upward trend over the analyzed periods, indicating improvements in overall profitability.
The gross profit margin has increased from 46.48% as of June 30, 2021, to 50.84% as of June 30, 2025. This reflects a steady enhancement in the company's ability to generate profit from its core operations before accounting for operating expenses, suggesting effective management of production costs or favorable sales pricing strategies.
The operating profit margin has similarly improved, rising from 22.16% in 2021 to 26.32% in 2025. The expansion indicates that the company has been successful in controlling operating costs relative to revenues, resulting in increased efficiency in its operational activities.
Pretax margin has shown a parallel growth trajectory, increasing from 22.40% to 25.83% over the period. This upward movement demonstrates that the company’s profitability before tax has been maintained and slightly improved, possibly due to better operational leverage or favorable tax planning.
The net profit margin has experienced growth from 17.32% in 2021 to 19.84% in 2025. This signifies an overall enhancement in the company's bottom-line profitability, influenced by improvements at all preceding levels of profitability and effective tax management.
Overall, the progressive increases across these profitability ratios indicate a robust and improving financial health, with the company becoming more efficient at converting revenues into profit at each stage of its income statement. This trend suggests sound operational management, cost control, and potentially favorable market or pricing conditions over the analyzed period.
Return on investment
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 10.14% | 9.09% | 8.84% | 6.03% | 6.82% |
| Return on assets (ROA) | 7.64% | 6.90% | 6.69% | 4.68% | 5.33% |
| Return on total capital | 93.02% | 115.18% | 133.80% | 120.62% | 60.33% |
| Return on equity (ROE) | 65.93% | 82.51% | 97.23% | 91.43% | 45.83% |
The analysis of Automatic Data Processing Inc.'s profitability ratios over the period from June 30, 2021, to June 30, 2025, reveals several important trends and insights.
Starting with Operating Return on Assets (Operating ROA), there was a decline from 6.82% in 2021 to a low of 6.03% in 2022, followed by a steady increase to 8.84% in 2023 and further to 9.09% in 2024. The expected continuation of this upward trajectory is indicated by a projected 10.14% in 2025. This pattern suggests that while the company's core operating efficiency experienced some pressure in 2022, it has since improved, indicating enhanced operational profitability relative to its assets.
In terms of Return on Assets (ROA), which considers overall net income relative to total assets, a similar pattern is observed. The ratio decreased from 5.33% in 2021 to 4.68% in 2022, then increased to 6.69% in 2023, and showed slight growth to 6.90% in 2024, with a further anticipated rise to 7.64% in 2025. This indicates a recovery and strengthening in the company's ability to generate profit from its total assets over time.
The Return on Total Capital demonstrates a notable volatility, with a remarkable jump from 60.33% in 2021 to 120.62% in 2022, continuing to rise to 133.80% in 2023. However, this ratio slightly declined to 115.18% in 2024 and further to 93.02% in 2025. The exceptionally high ratios in 2022 and 2023 may reflect increased leverage or extraordinary gains, whereas the decline thereafter suggests a normalization or reduction in the return on capital employed.
Return on Equity (ROE) exhibits a significant increase from 45.83% in 2021 to a peak of 97.23% in 2023, followed by a decrease to 82.51% in 2024, and subsequently to 65.93% in 2025. The substantial growth in ROE during 2022 and 2023 indicates enhanced profitability attributable to shareholders, possibly driven by improved net income margins or leveraged capital structure. The subsequent decline signals a normalization or adjustment in the company's equity returns, which could be due to increased equity base, reduced leverage, or changes in profitability margins.
Overall, the profit ratios depict a company that initially experienced some operational and asset efficiency challenges in 2022 but subsequently demonstrated improvement in profitability metrics. The elevated ROE and return on total capital in 2022 and 2023 highlight periods of strong shareholder returns and capital efficiency, although recent trends suggest some easing in these metrics. These ratios together point to a pattern of cyclical profitability, with an emphasis on operational improvement and prudent capital management over the analyzed period.