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"I see ADP as a really large, sticky professional services company with a 92% client retention rate and impressive free cash flow, but I also see it as having more potential to be disrupted than to grow from. Trading at about 24 times forward earnings for a business growing at single digits, growth and margin pressures are my biggest concerns. With expected five-year returns between 10-15% and a safety score of 7, the risk of AI solutions taking over payroll functions is a real threat."
The commentary highlights ADP's strong operational metrics such as client retention and cash generation, while cautioning that the mature nature of its business and potential disruption from in-house AI solutions may limit its growth prospects over the next five years.
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