With 82% ownership of the shares, Automatic Data Processing, Inc. (NASDAQ:ADP) is heavily dominated by institutional owners
March 4, 2025
0 4 minutes read
Given the large stake in the stock by institutions, Automatic Data Processing’s stock price might be vulnerable to their trading decisions
A total of 25 investors have a majority stake in the company with 48% ownership
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
To get a sense of who is truly in control of Automatic Data Processing, Inc. (NASDAQ:ADP), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 82% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
Let’s delve deeper into each type of owner of Automatic Data Processing, beginning with the chart below.
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
We can see that Automatic Data Processing does have institutional investors; and they hold a good portion of the company’s stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Automatic Data Processing, (below). Of course, keep in mind that there are other factors to consider, too.
NasdaqGS:ADP Earnings and Revenue Growth March 4th 2025
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Automatic Data Processing is not owned by hedge funds. The Vanguard Group, Inc. is currently the largest shareholder, with 10% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.9% and 4.6%, of the shares outstanding, respectively.
Our studies suggest that the top 25 shareholders collectively control less than half of the company’s shares, meaning that the company’s shares are widely disseminated and there is no dominant shareholder.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our most recent data indicates that insiders own less than 1% of Automatic Data Processing, Inc.. As it is a large company, we’d only expect insiders to own a small percentage of it. But it’s worth noting that they own US$135m worth of shares. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Automatic Data Processing. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
