Comparing Automatic Data Processing (NASDAQ:ADP) & Science Applications International (NASDAQ:SAIC)

Science Applications International (NASDAQ:SAIC) and Automatic Data Processing (NASDAQ:ADP) are both industrials companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, dividends, profitability, valuation and risk.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Science Applications International and Automatic Data Processing, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Science Applications International	1	8	2	0	2.09
Automatic Data Processing	2	9	3	0	2.07

Science Applications International currently has a consensus price target of $125.22, suggesting a potential downside of 16.09%. Automatic Data Processing has a consensus price target of $285.00, suggesting a potential downside of 5.00%. Given Automatic Data Processing’s higher possible upside, analysts clearly believe Automatic Data Processing is more favorable than Science Applications International.

Volatility and Risk

Science Applications International has a beta of 0.27, indicating that its stock price is 73% less volatile than the S&P 500. Comparatively, Automatic Data Processing has a beta of 0.77, indicating that its stock price is 23% less volatile than the S&P 500.

Valuation and Earnings

This table compares Science Applications International and Automatic Data Processing”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Science Applications International	$7.26 billion	0.86	$358.00 million	$8.55	17.45
Automatic Data Processing	$21.95 billion	5.40	$4.41 billion	$11.28	26.60

Automatic Data Processing has higher revenue and earnings than Science Applications International. Science Applications International 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.

Insider & Institutional Ownership

76.0% of Science Applications International shares are held by institutional investors. Comparatively, 80.0% of Automatic Data Processing shares are held by institutional investors. 0.7% of Science Applications International shares are held by insiders. Comparatively, 0.2% of Automatic Data Processing shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Dividends

Science Applications International pays an annual dividend of $1.48 per share and has a dividend yield of 1.0%. Automatic Data Processing pays an annual dividend of $6.80 per share and has a dividend yield of 2.3%. Science Applications International pays out 17.3% of its earnings in the form of a dividend. Automatic Data Processing pays out 60.3% 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 49 consecutive years. Automatic Data Processing is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Science Applications International and Automatic Data Processing’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Science Applications International	5.13%	34.68%	9.45%
Automatic Data Processing	20.33%	77.01%	6.67%

Summary

Automatic Data Processing beats Science Applications International on 13 of the 17 factors compared between the two stocks.

About Science Applications International

Science Applications International Corporation provides technical, engineering, and enterprise information technology (IT) services primarily in the United States. The company’s offerings include engineering; technology integration; IT modernization; maintenance of ground and maritime systems; logistics; training and simulation; operation and program support services; and end-to-end services, such as design, development, integration, deployment, management and operations, sustainment, and security of its customers’ IT infrastructure, as well as cloud migration, managed services, infrastructure modernization, and enterprise IT-as-a-service solutions. It serves the U.S. military comprising Army, Air Force, Navy, Marines, and Coast Guard; Department of Defense agencies; National Aeronautics and Space Administration; the U.S. Department of State; Department of Justice; Department of Homeland Security; and various intelligence community agencies, as well as U.S. federal civilian agencies. The company was formerly known as SAIC Gemini, Inc. and changed its name to Science Applications International Corporation in September 2013. Science Applications International Corporation was founded in 1969 and is headquartered in Reston, Virginia.

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 services, 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 solution to businesses through a co-employment model. This segment offers employee benefits, protection and compliance, talent engagement, expertise, comprehensive outsourcing, and recruitment process outsourcing services. Automatic Data Processing, Inc. was founded in 1949 and is headquartered in Roseland, New Jersey.