Stock (Symbol) |
Alliance Data Systems (ADS) |
Stock Price |
$297 |
Sector |
| Financial |
Data is as of |
| November 9, 2015 |
Expected to Report |
| Feb 3 – Feb 8 |
Company Description |
 Alliance Data Systems Corporation is a provider of transaction-based, data-driven marketing and loyalty solutions serving consumer-based businesses in a variety of industries. The Company offers a portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, marketing strategy consulting, analytics and creative services, direct marketing services and private label and co-brand retail credit card programs. It focuses on facilitating and managing interactions between its clients and their customers through all consumer marketing channels, including in-store, on-line, catalog, mail, telephone and email, and emerging channels, such as mobile and social media. Its products and services operate under three segments: LoyaltyOne, Epsilon and Private Label Services and Credit. Source: Thomson Financial |
Sharek’s Take |
 Alliance Data Systems (ADS) provides loyalty programs, private label credit card services, marketing, customer care and collections for more than 135 retailers who do business with 37 million households. Clients include Walgreens, Bank of America, General Motors, FedEx, Victoria’s Secret, Pottery Barn, J Crew, Ann Taylor, and more recently Overstock.com as well as Gamestop. ADS is growing revenue by implementing new technology into its programs, and targets customers using data to send out coupons and promotions. The stock currently sells for 20x earnings, and if that P/E stays the same the $297 stock can go to $344 in 2016 and $392 in 2017 if ADS meets current earnings estimates. This is a solid stock to buy-and-hold at a reasonable price. |
One Year Chart |
 Stock hasn’t gone anywhere in the one-year chart, but a year ago the P/E was around 21-22. Now ADS sells for just 17x 2016 estimates. The stock fell in the Summer when it missed sales estimates by $25 million, but then came back and beat estimates by $40 million last qtr. Still, ADS does $6.5 billion in revenue, so that wasn’t an issue anyway.
Looking ahead, profits look to grow in the high-teens the next 4 qtrs, and Annual Profit Estimates remain fairly steady. The company doesn’t pay a dividend, but it buys back stock. |
Fair Value |
 It’s amazing to me we didn’t load up on this stock during 2010 and 2011 when the P/E was below 10. What a bargain. The stock now sells for 20x 2015 profit estimates, and according to my analysis the stock has 16% upside to 2016’s Fair Value and 32% upside to 2017’s. |
Bottom Line |
 ADS had its IPO in 2001 at $12 a share, and introduced using card data to drive highly targeted marketing. During the 2008-2009 recession it bought back one-third of the company at $50 a share. Today ADS is focused on European expansion and creating huge scale in key digital distribution channels.Alliance Data is a well oiled machine which is utilizing technology to drive sales for retailers. This is a solid company which could continue to grow in the high-teens and is selling at a reasonable 17x next years earnings. ADS ranks 15th in the 32 stock Growth Portfolio Power Rankings and 4th in the 30 stock Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
15 of 32Aggressive Growth Portfolio N/AConservative Stock Portfolio 4 of 30 |
