InvestBattle | Walmart vs Costco

March 29, 2024by

As we noted in the last week’s issue, over the past three months, one of the leaders of growth in the S&P 500 index has been the Professional Services industry (+4.4%).

The largest companies in this industry (by market capitalization): Automatic Data Processing ($101.7B), which provides HR outsourcing for 1M clients in the US, and Paychex ($44.0B), which provides HR management and payroll services for more than 740K clients in the US and Europe ($44.0B).

According to the latest quarterly reporting data, we analyzed each company’s profitability, strength, and efficiency criteria using the methodology of Stanford University professor Joseph Piotroski.

As you can see, from the fundamental data assessment point of view, both companies are currently performing quite strongly. Both Automatic Data Processing and Paychex look attractive for medium- and long-term investments.

Over the past 3 months, shares of Automatic Data Processing have risen by +6.6%, while Paychex has fallen by -5.7% (the S&P 500 index has risen by +11.3%). Automatic Data Processing outperformed its closest competitor, but did not show better results compared to the index.

So, the winner in today’s battle is Automatic Data Processing (ADP). Although Paychex is superior in terms of liquidity, Automatic Data Processing’s business looks healthier in terms of financial leverage, and its shares show better dynamics.

* This is not an investment recommendation. It is up to each individual to decide which criteria to favor when making an investment decision, taking into account their goals and individual risk tolerance.
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