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Should You Retain Alliance Data (ADS) Stock in Your Portfolio?

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  • ADS
  • BBU

Alliance Data Systems Corporation ADS has been in investors’ good books owing to, improved credit sales performance, strategic relationships and a robust capital position.

Growth Projections

The Zacks Consensus Estimate for Alliance Data’s 2021 earnings per share is pegged at $18.14, indicating a year-over-year increase of 93.1%.

Estimate Revision

The Zacks Consensus Estimate for 2021 has moved 1.3% north in the past 30 days. This should instill investors' confidence in the stock.

Earnings Surprise History

Alliance Data has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 52.91%.

Zacks Rank & Price Performance

Alliance Data currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 17.3% compared with the industry’s decline of 26.5%.

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Zacks Investment Research

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Return on Equity (ROE)

The company’s ROE for the trailing 12 months is 51.7%, better than the industry average of 29.3%, reflecting the company’s efficiency in utilizing shareholders’ fund. The company aims to generate solid mid-teens returns for its shareholders.

Style Score

The company is well poised for progress, as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth, and M for Momentum, with the score being a weighted combination of all three factors.

Business Tailwinds

Higher finance charges, due to an increase in finance charge yield, and a decline in charge-offs for unpaid interest and fees as well as higher merchant fee revenues are likely to boost the Card Service segment.

Banking on improving consumer confidence and increased mobility, credit sales performance is expected to improve along with strong digital sales growth.

Alliance Data estimates credit sales to increase in double digits in 2021. It expects to resume high single to low double-digit receivables growth in 2022. ADS targets high single-digit annual receivable growth in 2023.

Alliance Data remains focused on making strategic relationships with Bread, that includes RBC, Fiserv and Sezzle, which is expected to expand and improve their customer experience and increase their ability to provide payment choices to consumers. Continuous investment in the Bread platform and digital capabilities are likely to boost growth in 2022 and beyond.

The spinoff of the LoyaltyOne segment into an independent, publicly-traded company, Loyalty Ventures Inc. has enhanced Alliance Data’s strategic transformation to deliver long-term, sustainable growth. With the spinoff, both companies are likely to focus on their unique growth opportunities. This will strengthen Alliance Data’s balance sheet and improve key ratios.

Alliance Data has a strong balance sheet by virtue of its solid cash position. The company also extended the timeline for further debt reduction of $2 billion from June 2021 till December 2022 and extended an additional debt of $850 million from June 2021 to December 2024.

Stocks to Consider

Some better-ranked stocks from the business service sector are ABM Industries ABM, CBIZ CBZ and Brookfield Business Partners BBU, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ABM Industries’s earnings surpassed estimates in three of the last four quarters, and missed in one, the average beat being 20.81%. The Zacks Consensus Estimate for Brookfield Business’s 2021 earnings implies 45.2% year-over-year growth.

CBIZ’s earnings surpassed estimates in each of the last four quarters, the average beat being 49.75%. The Zacks Consensus Estimate for CBIZ’s 2021 earnings implies 23.2% year-over-year growth.

Brookfield Business’ earnings surpassed estimates in each of the last four quarters, the average beat being 49.67%. The Zacks Consensus Estimate for Brookfield Business’ 2021 earnings implies 969% year-over-year growth.

ABM, CBZ and BBU have gained 12.6%, 46.4% and 17.2%, respectively, in the past year.


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Alliance Data Systems Corporation (ADS) : Free Stock Analysis Report

ABM Industries Incorporated (ABM) : Free Stock Analysis Report

CBIZ, Inc. (CBZ) : Free Stock Analysis Report

Brookfield Business Partners L.P. (BBU) : Free Stock Analysis Report

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