Another Acquisition for ADP - Analyst Blog
02 Fevereiro 2012 - 2:15PM
Zacks
Automatic Data Processing Inc. (ADP) recently
announced the acquisition of privately held PhyLogic Healthcare
LLC, a well known provider of revenue cycle management (RCM) and
medical billing outsourcing services. However, terms of the
transaction were not disclosed.
Founded in 2001, Springfield, Massachusetts-based PhyLogic
provides billing and accounts receivable services to medical
practitioners across the U.S. The company also provides electronic
health records (EHR) and cloud-based practice management (PM)
solutions. Post acquisition, PhyLogic will be integrated into ADP’s
medical office software division, AdvancedMD that was acquired in
early 2011.
The acquisition of PhyLogic marks an important addition to ADP’s
portfolio, as it will help the company to enter the fast growing
RCM market. The U.S. RCM market is expected to grow from
approximately $4 billion in 2010 to more than $9 billion by 2018,
driven by the upcoming medical reimbursement regulation changes,
according to ST Advisors, LLC.
We believe that the PhyLogic acquisition will help ADP to seize
this significant opportunity over the long term. Moreover,
PhyLogic’s client base primarily consists of small- and mid-size
U.S. medical practitioners, a niche market that ADP has been
focusing on for some time. ADP is also expected to widen its
presence in the small business services segment through this
acquisition.
Our Take
ADP’s growth in recent years has been largely driven by
accretive acquisitions, for which it has spent approximately $776
million in 2011 itself. If the latest acquisitions are anything to
go by, then the company clearly intends to continue along the same
lines in 2012.
In early January, ADP entered the lucrative Indian market with
the acquisition of Ma Foi Consulting Solutions Ltd, an Indian human
resource and payroll management company. The acquisition is a
strategic fit for the company as it will facilitate further
expansion in developing markets. Through this acquisition, ADP will
gain access to the growing market of human resource business
process outsourcing (HR BPO) in India.
We believe that the back-to-back acquisitions will drive
top-line growth for fiscal 2012 and beyond. The acquisitions are
expected to diversify ADP’s revenue base, which in turn will help
the company to outperform the market, in our view.
However, increasing competition from Paychex
Inc. (PAYX) and Insperity Inc. (NSP) and
a gloomy macro outlook in North America and Europe are major
headwinds in the near term. Additionally, higher unemployment rates
and low interest rates remain concerns for the company’s payroll
processing business.
We maintain our Neutral recommendation on the stock over the
long term (6-12 months). Currently, ADP has a Zacks #3 Rank, which
implies a Hold rating on a short-term basis.
AUTOMATIC DATA (ADP): Free Stock Analysis Report
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