Automatic Data Processing (NASDAQ:ADP – Get Rating) and HireRight (NYSE:HRT – Get Rating) are both business services companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, analyst recommendations, profitability, institutional ownership and risk.
Earnings and Valuation
This table compares Automatic Data Processing and HireRight’s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Automatic Data Processing | $16.50 billion | 5.54 | $2.95 billion | $7.83 | 28.27 |
| HireRight | $783.40 million | 0.04 | -$705,000.00 | ($0.25) | -44.88 |
Automatic Data Processing has higher revenue and earnings than HireRight. HireRight is trading at a lower price-to-earnings ratio than Automatic Data Processing, indicating that it is currently the more affordable of the two stocks.
Profitability
| Net Margins | Return on Equity | Return on Assets | |
| Automatic Data Processing | 18.46% | 104.60% | 5.84% |
| HireRight | N/A | N/A | N/A |
Dividends
Automatic Data Processing pays an annual dividend of $5.00 per share and has a dividend yield of 2.3%. HireRight pays an annual dividend of $0.12 per share and has a dividend yield of 1.1%. Automatic Data Processing pays out 63.9% of its earnings in the form of a dividend. HireRight pays out -48.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Automatic Data Processing has raised its dividend for 48 consecutive years. Automatic Data Processing is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Institutional & Insider Ownership
79.2% of Automatic Data Processing shares are owned by institutional investors. Comparatively, 12.5% of HireRight shares are owned by institutional investors. 0.3% of Automatic Data Processing shares are owned by company insiders. Comparatively, 13.0% of HireRight shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.
Analyst Ratings
This is a breakdown of recent ratings and target prices for Automatic Data Processing and HireRight, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Automatic Data Processing | 2 | 2 | 2 | 0 | 2.00 |
| HireRight | 0 | 4 | 3 | 0 | 2.43 |
Automatic Data Processing currently has a consensus price target of $237.25, suggesting a potential upside of 7.20%. HireRight has a consensus price target of $12.98, suggesting a potential upside of 15.64%. Given HireRight’s stronger consensus rating and higher probable upside, analysts clearly believe HireRight is more favorable than Automatic Data Processing.
Volatility and Risk
Automatic Data Processing has a beta of 0.8, indicating that its share price is 20% less volatile than the S&P 500. Comparatively, HireRight has a beta of 0.17, indicating that its share price is 83% less volatile than the S&P 500.
Summary
Automatic Data Processing beats HireRight on 12 of the 17 factors compared between the two stocks.
About Automatic Data Processing
Automatic Data Processing, Inc. provides cloud-based human capital management solutions worldwide. It operates in two segments, Employer Services and Professional Employer Organization (PEO). The Employer Services segment offers strategic, cloud-based platforms, and human resources (HR) outsourcing solutions. Its offerings include payroll, benefits administration, talent management, HR management, workforce management, insurance, retirement, and compliance services, as well as integrated HCM solutions. The PEO Services segment provides HR outsourcing solutions to small and mid-sized businesses through a co-employment model. This segment offers benefits package, protection and compliance, talent engagement, expertise, comprehensive outsourcing, and recruitment process outsourcing services. The company was founded in 1949 and is headquartered in Roseland, New Jersey.
About HireRight
HireRight Holdings Corporation provides technology-driven workforce risk management and compliance solutions worldwide. The company offers background screening, verification, identification, monitoring, and drug and health screening services for customers. It provides its services through software and data platform that integrates into its customers' human capital management systems enabling workflows for workforce hiring, onboarding, and monitoring. The company was incorporated in 1990 and is based in Nashville, Tennessee.
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