Home > Comparison > Industrials > ADP vs CTSH
The strategic rivalry between Automatic Data Processing, Inc. (ADP) and Cognizant Technology Solutions Corporation (CTSH) shapes the evolution of their respective sectors. ADP, an industrials leader, operates a capital-intensive cloud-based human capital management platform. In contrast, CTSH thrives as a technology-driven professional services firm focused on digital transformation and outsourcing. This analysis will assess which business model offers superior risk-adjusted returns for a diversified portfolio amid shifting industry dynamics.
Table of contents
Companies Overview
Automatic Data Processing, Inc. and Cognizant Technology Solutions Corporation both shape essential service sectors with strong market footprints.
Automatic Data Processing, Inc.: Leader in Human Capital Management
Automatic Data Processing, Inc. dominates the staffing and employment services industry. It generates revenue primarily through cloud-based human capital management solutions, including payroll, benefits, and workforce management. In 2026, the company focused on enhancing integrated HCM platforms and expanding its Professional Employer Organization services for small and mid-sized businesses, reinforcing its competitive edge.
Cognizant Technology Solutions Corporation: Powerhouse in IT Services
Cognizant Technology Solutions Corporation leads in information technology services by delivering consulting, technology, and outsourcing solutions globally. Its core revenue stems from digital transformation services, AI, and automation across sectors like healthcare, financial services, and media. The firm’s 2026 strategy emphasized advanced analytics, AI-driven customer experience, and operational efficiencies to capture growing demand for digital solutions.
Strategic Collision: Similarities & Divergences
Both companies prioritize technology-driven service delivery but differ fundamentally in approach. ADP builds on a closed ecosystem focused on HR outsourcing, while Cognizant embraces an open infrastructure serving diverse industries with digital transformation. Their main battleground lies in the corporate services market where automation and cloud platforms drive growth. Investors face distinct profiles: ADP offers stability rooted in payroll services; Cognizant pursues growth through innovation and sector diversification.
Income Statement Comparison
This data dissects the core profitability and scalability of both corporate engines to reveal who dominates the bottom line:
| Metric | Automatic Data Processing, Inc. (ADP) | Cognizant Technology Solutions Corporation (CTSH) |
|---|---|---|
| Revenue | 20.56B | 21.11B |
| Cost of Revenue | 10.11B | 13.99B |
| Operating Expenses | 5.04B | 3.59B |
| Gross Profit | 10.45B | 7.12B |
| EBITDA | 6.24B | 4.17B |
| EBIT | 5.76B | 3.62B |
| Interest Expense | 456M | 37M |
| Net Income | 4.08B | 2.23B |
| EPS | 10.02 | 4.56 |
| Fiscal Year | 2025 | 2025 |
Income Statement Analysis: The Bottom-Line Duel
This income statement comparison reveals the true efficiency and profitability of two corporate engines through detailed margin and growth analysis.
Automatic Data Processing, Inc. Analysis
ADP’s revenue climbs steadily from 15B in 2021 to 20.6B in 2025, with net income surging from 2.6B to 4.1B. It sustains strong gross and net margins, around 51% and 20%, respectively. In 2025, ADP’s operating efficiency accelerates with EBIT growth near 10%, reflecting robust margin expansion and disciplined cost control.
Cognizant Technology Solutions Corporation Analysis
Cognizant’s revenue grows from 18.5B in 2021 to 21.1B in 2025, but net income rises modestly from 2.1B to 2.2B. Gross margin hovers near 34%, while net margin rests at 10.6%. Despite a notable 21% EBIT jump in 2025, net margin declines, signaling margin pressure amid rising operating expenses.
Margin Strength vs. Growth Momentum
ADP outpaces with superior margin health and consistent net income growth, boasting a near 20% net margin versus Cognizant’s 10.6%. While Cognizant shows higher EBIT growth momentum, its stagnant net income and shrinking margins limit efficiency. ADP’s profile appeals more to investors seeking steady profitability and margin expansion.
Financial Ratios Comparison
These vital ratios act as a diagnostic tool to expose the underlying fiscal health, valuation premiums, and capital efficiency of each company:
| Ratios | Automatic Data Processing, Inc. (ADP) | Cognizant Technology Solutions Corporation (CTSH) |
|---|---|---|
| ROE | 65.9% | 0% |
| ROIC | 24.7% | 0% |
| P/E | 30.8 | 17.9 |
| P/B | 20.3 | 0 |
| Current Ratio | 1.05 | 0 |
| Quick Ratio | 1.05 | 0 |
| D/E (Debt-to-Equity) | 1.46 | 0 |
| Debt-to-Assets | 17.0% | 0% |
| Interest Coverage | 11.9 | 95.4 |
| Asset Turnover | 0.39 | 0 |
| Fixed Asset Turnover | 20.0 | 0 |
| Payout Ratio | 58.8% | 27.4% |
| Dividend Yield | 1.91% | 1.53% |
| Fiscal Year | 2025 | 2025 |
Efficiency & Valuation Duel: The Vital Signs
Ratios act as a company’s DNA, exposing hidden risks and revealing operational excellence critical to investment decisions.
Automatic Data Processing, Inc.
ADP demonstrates strong profitability with a 65.9% ROE and a healthy 19.8% net margin, signaling operational efficiency. Its valuation appears stretched, with a P/E of 30.8 and P/B at 20.3, above typical benchmarks. The company balances shareholder returns with a modest 1.9% dividend yield, reflecting steady income alongside reinvestment in growth.
Cognizant Technology Solutions Corporation
CTSH shows a favorable net margin of 10.6% but lacks reported ROE and ROIC data, raising transparency concerns. Its P/E of 17.9 suggests a fair valuation compared to peers. The dividend yield stands at 1.5%, indicating moderate shareholder returns. However, several liquidity and efficiency metrics remain unavailable or unfavorable, implying operational challenges.
Premium Valuation vs. Operational Transparency
ADP offers a robust profitability profile but trades at a premium, reflecting confidence in its capital allocation. CTSH presents a more conservative valuation but suffers from incomplete ratio disclosures and weaker operational metrics. Investors prioritizing proven efficiency may prefer ADP, while those favoring valuation discipline might lean toward CTSH’s profile.
Which one offers the Superior Shareholder Reward?
I find ADP delivers a superior shareholder reward compared to CTSH. ADP’s dividend yield stands at 1.9% with a payout ratio near 59%, well-covered by free cash flow (FCF). Its buyback intensity complements steady dividends, enhancing total returns. CTSH yields 1.5% with a 27% payout, favoring reinvestment and modest buybacks. ADP’s balanced distribution, backed by strong margins and cash flow, signals sustainable long-term value. CTSH’s lower payout and growth focus create volatility risk. For 2026, I favor ADP’s consistent, cash-backed distributions for total return stability.
Comparative Score Analysis: The Strategic Profile
The radar chart reveals the fundamental DNA and trade-offs of Automatic Data Processing, Inc. and Cognizant Technology Solutions Corporation:
Cognizant shows a more balanced financial profile with solid scores across ROA (5), Debt/Equity (3), and valuation metrics (PE/PB at 3 each). ADP relies heavily on its superior ROE (5) but struggles on valuation, especially P/B (1). ADP’s weaker balance sheet and valuation scores contrast with Cognizant’s consistent moderate-to-favorable ratings, indicating Cognizant’s strategic flexibility in this cycle.
Bankruptcy Risk: Solvency Showdown
The Altman Z-Score gap highlights a stark solvency contrast:
Cognizant’s Z-Score of 6.9 places it firmly in the safe zone, signaling robust financial health and low bankruptcy risk. ADP’s 1.7, however, lands it in the distress zone, raising red flags about long-term survival amid potential market downturns.
Financial Health: Quality of Operations
Both firms share a strong Piotroski F-Score of 7, reflecting solid operational quality:
This score signals good financial health and effective internal controls for both. Nonetheless, ADP’s distress-zone Altman Z-Score suggests underlying solvency concerns despite operational strengths, unlike Cognizant’s healthier balance sheet position.
How are the two companies positioned?
This section dissects the operational DNA of ADP and CTSH by comparing revenue distribution and internal dynamics. The goal is to confront their economic moats to identify the most resilient and sustainable competitive advantage today.
Revenue Segmentation: The Strategic Mix
This comparison dissects how Automatic Data Processing, Inc. and Cognizant Technology Solutions Corporation diversify their income streams and where their primary sector bets lie:
ADP anchors its revenue in Human Capital Management (HCM) with $8.67B, supported by Professional Employee Organization Services at $4.29B and Global services at $2.63B. This mix shows a strong focus on workforce solutions with moderate diversification. Cognizant, in contrast, balances four substantial segments, led by Financial Services at $5.75B and Healthcare at $5.93B. Cognizant’s broader sector spread mitigates concentration risk, while ADP’s dominance in HCM fuels ecosystem lock-in and infrastructure strength.
Strengths and Weaknesses Comparison
This table compares the Strengths and Weaknesses of ADP and CTSH:
ADP Strengths
- High net margin at 19.84%
- Strong ROE at 65.93%
- ROIC of 24.66% well above WACC
- Favorable debt-to-assets at 16.99%
- Significant global revenue diversification across HCM, HRO, Global segments
- Stable presence in US, Europe, Canada markets
CTSH Strengths
- Favorable net margin at 10.56%
- Excellent interest coverage at 97.92
- Favorable debt and debt-to-assets ratios
- Diversified revenue streams across Financial Services, Healthcare, Communication sectors
- Global footprint including North America, Europe, and Other Regions
ADP Weaknesses
- High P/E at 30.77 and P/B at 20.29 signaling expensive valuation
- Debt-to-equity at 1.46 is relatively high
- Asset turnover at 0.39 is low
- Moderate current ratio at 1.05 suggests tight liquidity
- Heavy reliance on US market dominates revenue
CTSH Weaknesses
- Zero ROE and ROIC indicate weak profitability metrics
- Current and quick ratios unavailable or zero, indicating liquidity concerns
- Asset and fixed asset turnover data not available
- Slightly unfavorable overall financial ratio profile
- Smaller market share concentration in some segments
ADP’s strengths lie in robust profitability and diversified global operations but face valuation and liquidity challenges. CTSH shows solid debt management and sector diversification but struggles with profitability and liquidity transparency. These factors shape each company’s strategic priorities in financial health and growth.
The Moat Duel: Analyzing Competitive Defensibility
A structural moat is the sole shield protecting long-term profits from relentless competition erosion. Let’s dissect how these moats manifest in 2026:
Automatic Data Processing, Inc. (ADP): Switching Costs Anchor
ADP’s moat stems from high switching costs embedded in its integrated human capital management platforms. This creates stable margins and a ROIC consistently above WACC by 17%, signaling value creation. Expansion into international markets deepens its moat in 2026.
Cognizant Technology Solutions Corporation (CTSH): Service Diversification Challenge
CTSH relies on diversified IT consulting services but lacks a clear ROIC advantage, with a declining trend signaling weakening competitive positioning. Growth hinges on successful digital transformation projects and market disruption risks remain elevated.
Moat Battle: Switching Costs vs. Service Agility
ADP’s wider moat, anchored by entrenched switching costs and rising ROIC, outmatches CTSH’s fragile service-based moat marked by declining profitability. ADP stands better equipped to defend and grow its market share amid intensifying competition.
Which stock offers better returns?
The past year shows contrasting price movements between Automatic Data Processing, Inc. and Cognizant Technology Solutions Corporation, reflecting diverging trading dynamics and momentum shifts.
Trend Comparison
Automatic Data Processing, Inc. experienced a 3.06% price decline over the past 12 months, marking a bearish trend with deceleration and high volatility, as prices ranged from 234.67 to 326.81.
Cognizant Technology Solutions Corporation posted a 1.83% price gain over the same period, signaling a bullish trend with acceleration and lower volatility, fluctuating between 64.26 and 90.7.
Comparing both, Automatic Data Processing, Inc. shows a bearish trend while Cognizant edges a modest bullish trend, with Cognizant delivering the highest market performance over the last year.
Target Prices
Analysts present a confident target price consensus for both Automatic Data Processing, Inc. and Cognizant Technology Solutions Corporation.
| Company | Target Low | Target High | Consensus |
|---|---|---|---|
| Automatic Data Processing, Inc. | 230 | 306 | 274.71 |
| Cognizant Technology Solutions Corporation | 82 | 107 | 94.44 |
The consensus target prices suggest upside potential for ADP and CTSH versus current prices of $234.67 and $76.71, respectively. Analysts expect significant appreciation supported by solid fundamentals and sector positioning.
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How do institutions grade them?
The following tables summarize the latest institutional grades assigned to Automatic Data Processing, Inc. and Cognizant Technology Solutions Corporation:
Automatic Data Processing, Inc. Grades
Below is a summary of recent grades from major financial institutions for ADP.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Wells Fargo | Maintain | Underweight | 2026-01-29 |
| Citigroup | Maintain | Neutral | 2026-01-29 |
| JP Morgan | Maintain | Underweight | 2026-01-29 |
| Morgan Stanley | Maintain | Equal Weight | 2026-01-29 |
| Stifel | Maintain | Hold | 2026-01-29 |
| Jefferies | Downgrade | Underperform | 2025-12-16 |
| JP Morgan | Maintain | Underweight | 2025-10-30 |
| Wells Fargo | Maintain | Underweight | 2025-10-30 |
| UBS | Maintain | Neutral | 2025-09-17 |
| Stifel | Maintain | Hold | 2025-07-31 |
Cognizant Technology Solutions Corporation Grades
Below is a summary of recent grades from major financial institutions for CTSH.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Guggenheim | Maintain | Buy | 2026-01-28 |
| Citigroup | Maintain | Neutral | 2026-01-22 |
| Wells Fargo | Maintain | Overweight | 2026-01-14 |
| TD Cowen | Maintain | Hold | 2026-01-09 |
| UBS | Maintain | Neutral | 2025-12-08 |
| William Blair | Upgrade | Outperform | 2025-11-21 |
| UBS | Maintain | Neutral | 2025-10-30 |
| Wells Fargo | Maintain | Overweight | 2025-10-30 |
| RBC Capital | Maintain | Sector Perform | 2025-10-30 |
| JP Morgan | Maintain | Overweight | 2025-10-30 |
Which company has the best grades?
Cognizant Technology Solutions Corporation consistently receives higher ratings such as Buy, Overweight, and Outperform. ADP’s grades lean towards Underweight, Hold, and Underperform. These differences may influence investor perception and portfolio allocation decisions.
Risks specific to each company
The following categories identify the critical pressure points and systemic threats facing both firms in the 2026 market environment:
1. Market & Competition
Automatic Data Processing, Inc.
- Faces intense competition in staffing and HR services with pressure to innovate cloud solutions rapidly.
Cognizant Technology Solutions Corporation
- Competes in a highly fragmented IT services market requiring constant technological upgrades and digital transformation.
2. Capital Structure & Debt
Automatic Data Processing, Inc.
- Moderate leverage with a debt-to-equity ratio of 1.46 signals higher financial risk despite favorable interest coverage.
Cognizant Technology Solutions Corporation
- Low to no reported debt, indicating a conservative capital structure and lower financial risk profile.
3. Stock Volatility
Automatic Data Processing, Inc.
- Beta of 0.85 suggests below-market volatility, offering relative price stability for investors.
Cognizant Technology Solutions Corporation
- Beta near 0.95 indicates volatility roughly in line with the technology sector benchmark.
4. Regulatory & Legal
Automatic Data Processing, Inc.
- Subject to evolving labor laws and compliance regulations affecting payroll and HR outsourcing services.
Cognizant Technology Solutions Corporation
- Faces regulatory scrutiny in data privacy and cross-border IT outsourcing compliance.
5. Supply Chain & Operations
Automatic Data Processing, Inc.
- Relies on cloud infrastructure and vendor partnerships; operational risks include technology disruptions.
Cognizant Technology Solutions Corporation
- Complex global delivery model exposes it to operational risks from geopolitical and logistical disruptions.
6. ESG & Climate Transition
Automatic Data Processing, Inc.
- Moderate ESG risks; pressure to enhance sustainability reporting and reduce carbon footprint in service operations.
Cognizant Technology Solutions Corporation
- Increasing demands to improve ESG disclosures and implement climate transition strategies in IT services delivery.
7. Geopolitical Exposure
Automatic Data Processing, Inc.
- Primarily US-focused, with limited direct geopolitical exposure but vulnerable to domestic policy shifts.
Cognizant Technology Solutions Corporation
- Significant international footprint increases exposure to geopolitical tensions, trade policies, and currency fluctuations.
Which company shows a better risk-adjusted profile?
Cognizant’s minimal debt and safer Altman Z-Score position it as the stronger risk-adjusted profile despite its operational complexities. ADP’s higher leverage and distress-zone bankruptcy risk weigh heavily against its stable market position. Cognizant’s recent surge in volume (+2.97% price change) signals investor confidence but warrants close monitoring of its volatile tech environment.
Final Verdict: Which stock to choose?
Automatic Data Processing, Inc. (ADP) stands out with its unmatched capital efficiency and a durable economic moat. Its ability to consistently generate returns well above its cost of capital marks it as a value creator. A point of vigilance is its stretched valuation multiples, which may temper near-term upside. ADP suits investors seeking aggressive growth with a margin of quality.
Cognizant Technology Solutions Corporation (CTSH) leverages a strategic moat rooted in steady recurring revenues and solid free cash flow generation. Compared to ADP, it offers a more conservative risk profile with a lower valuation and safer balance sheet metrics. CTSH fits well in growth-at-a-reasonable-price (GARP) portfolios focused on stable income streams and moderate appreciation.
If you prioritize superior capital returns and long-term value creation, ADP is the compelling choice due to its strong moat and robust profitability despite stretched multiples. However, if you seek better stability and valuation defensiveness in a tech-driven service provider, CTSH offers a safer investment scenario with solid cash flow and less volatility.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of Automatic Data Processing, Inc. and Cognizant Technology Solutions Corporation to enhance your investment decisions:
