ADP shares are down 23% from their 52-week high, despite solid growth. Revenue rose 7% year over year in Q1 of fiscal 2026, with management reiterating full-year outlook. Softening volume has investors reevaluating the stock’s premium valuation, leading to a decline in share price.

Automatic Data Processing (ADP) is known for its steady growth, but shares are down 23% from their high. Q1 of fiscal 2026 saw a 7% revenue increase to $5.2 billion, with earnings per share climbing 6% to $2.49. ADP’s core volume trend, however, is cooling, causing concern among investors.

ADP’s U.S. pays per control trend was flat in Q1 of fiscal 2026, down from 1% growth in previous quarters. This trend, if it remains flat or turns negative, could impact the company’s steady growth and premium valuation. ADP expects U.S. pays per control to remain flat in fiscal 2026.

ADP is focusing on expanding its human capital management (HCM) platform to drive growth. Initiatives like ADP Workforce Now NextGen and ADP Lyric HCM aim to attract new clients and expand services. Even with a flat pays-per-control trend, ADP’s growth remained robust in Q1 of fiscal 2026.

Despite a pullback in stock price, ADP trades at a premium with a price-to-earnings ratio of 25. As the company’s core volume metric flattens, it becomes more dependent on expanding offerings. This may slow earnings-per-share growth, impacting investor willingness to pay a high price-to-earnings multiple.

The Motley Fool’s Stock Advisor team did not include ADP in their top 10 stock picks. They focus on stocks with potential for high returns. Historical picks like Netflix and Nvidia have seen significant growth. Stock Advisor has a total average return of 966%, outperforming the S&P 500.

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