Why Hold is an Apt Strategy for Alliance Data (ADS) Stock
Data-driven marketing strategies, emphasis on digital capabilities, ramping up marketing spend in growth verticals poise Alliance data (ADS) well for...
Alliance Data Financial Corporation’s ADS solid Card Service segment, strategic acquisitions, and robust capital position along with favorable growth estimates make it worthy of retention in one’s portfolio.
Zacks Rank & Price Performance
Alliance Data currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 28.5% against the industry’s decrease of 10.8%. In the meantime, the Finance sector has witnessed an increase of 21.2% while the Zacks S&P 500 composite has risen 21.8%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2021 earnings is pegged at $17.68, indicating an increase of 88.3% from the year-ago reported figure. The long-term earnings growth rate is currently pegged at 17.1%.
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 56.4%, better than the industry average of 27.5%, reflecting the company’s efficiency in utilizing shareholders’ fund. The company aims to generate mid-to-high 20s returns for its shareholders
Earnings Surprise History
The life insurer has a decent track of delivering earnings surprise in the last five quarters, with the average beat being 12.34%.
The Zacks Consensus Estimate for 2021 has moved 6.2% north in the past 30 days, reflecting analyst optimism.
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.
Being a private label credit card processing firm for mid-market specialty retail stores in the United States, the company continues to benefit from data-driven marketing strategies. Its high-ROI Card Service segment is poised to deliver solid results banking on strategic endeavors like new partner signing, renewals, and a solid pipeline.
The strategic agreement with Fiserv will enable efficient integration and use of mobile wallets and virtual cards as well as support data and analytics capabilities while lowering service costs. The company is prudently investing in strategic growth areas and ramping up marketing spend in growth verticals.
The company also remains focused on enhancing its capabilities with an emphasis on digital capabilities. Its acquisition of Bread, a technology-driven digital payments company, will expand its digital offerings.
Alliance Data's strategic focus is to be a leading payment and lending solutions business. It thus decided to spin off its LoyaltyOne business.
Alliance Data estimates credit sales to deliver double-digit growth, with the net loss rate below 5% in 2021. Receivables at 2021 end are estimated to be in line with 2020 end levels. It expects high single-digit to low double-digit average receivables growth in 2022.
The company targets high single-digit annual receivable growth in 2023.
Strong Capital Position
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 same space include Envestnet ENV, Equifax EFX, and Evertec EVTC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Envestnet delivered an earnings surprise of 24.07% in the last reported quarter.
Equifax Financial delivered an earnings surprise of 15.79% in the last reported quarter.
Evertec delivered an earnings surprise of 36.84% in the last reported quarter.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.Click here for the 4 trades >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Alliance Data Systems Corporation (ADS): Free Stock Analysis Report
Equifax, Inc. (EFX): Free Stock Analysis Report
Envestnet, Inc (ENV): Free Stock Analysis Report
Evertec, Inc. (EVTC): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research