ADS  Alliance Data Systems Corporat...

Exchange

NYSE

Sector

Miscellaneous

Industry

Business Services

Market Cap.

13.63B

Vuru Grade

72.66/100

Current Price

$243.79
+0.87 (+0.36%)

Growth Price

$426.31
Undervalued by 74.87%

Stability Price

$169.17
Overvalued by 30.61%

Company Metrics

  • P/E 33.21
  • P/S 1.9
  • P/B 8.41
  • EPS 7.34
  • Cash ROIC 32.16%
  • Cash Ratio -
  • Dividend 2.08 / 0.87%
  • Avg. Vol. 559,344.00
  • Shares 55.91M
  • Market Cap. 13.63B

Company Description

Alliance Data Systems Corporation, together with its subsidiaries, provides data-driven and transaction-based marketing, and customer loyalty solutions primarily in the United States and Canada. The company operates in three segments: LoyaltyOne, Epsilon, and Private Label Services and Credit. The LoyaltyOne segment includes AIR MILES Reward Program that enables consumers to earn AIR MILES reward ... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Alliance Data Systems: If You Don't Like The Answer, Just Change The Question
Seeking Alpha - Aug 19, 2016
In the case of Alliance Data Systems, Wall Street is just now waking up to the misrepresentations that have been promulgated by ADS management.
Alliance Data Systems Corporation (ADS) – Citron Short Thesis - ValueWalk
Alliance Data Systems Corporation (ADS) Shares Have 50% Downside Potential ... - TCC
Alliance Data Systems (ADS) Edward Heffernan on Q1 2016 Results - Earnings ...
Seeking Alpha - Apr 21, 2016
Good morning, and welcome to the Alliance Data First Quarter 2016 Earnings Conference Call. At this time, all parties have been placed on a listen-only mode.
Alliance Data Reports First Quarter 2016 Results - PR Newswire (press release)
Alliance Data Systems - It May Be Expensive, But There's No Smoking Gun
Seeking Alpha - Nov 3, 2016
Three months ago, short seller Andrew Left of Citron Research published a report stating that Alliance Data Systems (NYSE:ADS) was not a software company that owns a bank, but a bank that owns a software company.
Alliance Data Systems: The Important Thing Citron Research Got Wrong About The ...
Seeking Alpha - Sep 1, 2016
Citron Research has recently published a research report on ADS with a target price of $100, implying 50% downside to the stock. According to Citron Research, the company is grossly overvalued.
Alliance Data Systems Corporation (ADS) Ex-Dividend Date Scheduled for ...
Nasdaq - Feb 10, 2017
Alliance Data Systems Corporation ( ADS ) will begin trading ex-dividend on February 13, 2017. A cash dividend payment of $0.52 per share is scheduled to be paid on March 17, 2017.
Alliance Data Systems Corporation (ADS) Director Roger H. Ballou Sells 648 Shares - Sports Perspectives
BRIEF-Alliance Data Systems Corp says proposes to offer EUR300 mln aggregate ...
Reuters - Mar 3, 2017
LONDON, March 20 Emerging stocks hit a two-year high and most currencies strengthened on Monday, still basking in the afterglow of the U.S.
Alliance Data Systems' (ADS) CEO Edward Heffernan on Q4 2016 Results ...
Seeking Alpha - Jan 26, 2017
Good morning, and welcome to the Alliance Data Fourth Quarter and Full Year 2016 Earnings Conference Call. At this time, all parties have been placed on a listen-only mode.
Alliance Data Declares Dividend on Common Stock - PR Newswire (press release)
JP Morgan Downgrades the shares of Alliance Data Systems Corporation (NYSE:ADS ... - HugoPress
Alliance Data Systems Corporation Announces Proposed Offering of $400 Million ...
PR Newswire (press release) - Oct 24, 2016
PLANO, Texas, Oct. 24, 2016 /PRNewswire/ -- Alliance Data Systems Corporation (NYSE: ADS) ("Alliance Data") announced today that it proposes to offer, subject to market conditions and other factors, $400.0 million aggregate principal amount of senior ...
Should Value Investors Pick Alliance Data Systems (ADS)? February 28, 2017
Zacks.com - Feb 28, 2017
We should also point out that Alliance Data Systems has a forward PE ratio (price relative to this year's earnings) of just 13.92, so it is fair to say that a slightly more value-oriented path may be ahead for Alliance Data Systems stock in the near ...
Financial services company hiring 150 workers for San Antonio call center - San Antonio Business Journal
Alliance Data (ADS) Up 10.4% Since Earnings Report: Can It Continue? - Nasdaq
Is Alliance Data Systems Corporation (ADS) undervalued when accounting for its ...
Simply Wall St - Mar 24, 2017
Looking at Alliance Data Systems Corporation (NYSE:ADS)'s fundamentals some investors are wondering if its last closing price of $242.92 represents a good value for money for this high growth stock.
Stock Returns: Alliance Data Systems Corporation (NYSE:ADS) is Beating Paychex ... - CML News
Alliance Data Systems' (ADS) “Buy” Rating Reiterated at Deutsche Bank AG - BNB Daily (blog)
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for ADS to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate ADS's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$243.79 Current Price

$426.31 Growth Price (DCF)

Undervalued by 74.87%


Growth Rate Assumed by Market: -0.29%


Future Free Cash Flow Growth Rate: 15.0%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$169.17 Stability Price (EPV)

Overvalued by 30.61%


Discount Rate: 15.0%

$- NCA Price

Overvalued by 100.00%

$1,061.71 Book Price

Undervalued by 335.50%


Varying Cash Return on Invested Capital over the past 5 years

ADS has efficiently invested its financial resources in buildings, projects, and equipment, resulting in strong returns. However, there is a substantial variation in their Cash ROIC from year-to-year. This company may have unreliable free cash flow or operates in a business where invested capital costs increase substantially on a sporadic basis. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

ADS has created $32.16 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20122013201420152016
Free Cash Flow 1.02B 868.12M 1.19B 1.51B 1.88B
divided by
Invested Capital 6.07B 7.76B 12.88B 14.85B 1.66B
Cash ROIC 16.76% 11.18% 9.20% 10.20% 113.46%

Excellent Return on Equity over the past 5 years

Over the past 5 years, ADS has generated strong profits with money shareholders have invested. This is considered one of the best indicators of quality management. Beware of extremely high Return on Equity (> 50%) as this is often unsustainable.

ADS has generated $37.91 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20122013201420152016
Net Income 422.26M 496.17M 516.14M 605.43M -
divided by
Stockholders' Equity 528.49M 855.76M 2.40B 2.01B 1.66B
Return on Equity 79.90% 57.98% 21.54% 30.12% -

Excellent Business Performance over the past 10 years

ADS has been able to maintain profitability in good times and bad. This could mean ADS has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

ADS has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Free Cash Flow 454.87M 401.46M 305.44M 833.95M 937.85M 1.02B 868.12M 1.19B 1.51B 1.88B

Very Weak Balance Sheet

ADS is in a poor financial position. This could be due to a slowdown in sales, indulging in debt-fuelled growth, or the nature of ADS's business. If it is highly capital intensive (see Economic Moat), they likely have to outlay significant capital just to stay competitive. This habit often destroys more value than it creates.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Cash 265.84M 156.91M 213.38M 139.11M 216.21M 893.35M 969.82M 1.08B 1.17B -
Current Assets 1.45B 1.94B 2.36B 6.13B 6.61B 9.13B 10.40B 13.81B 16.25B -
Total Assets 4.10B 4.36B 5.23B 8.27B 8.98B 12.00B 13.24B 20.26B 22.42B -
Current Liabilities 1.33B 1.95B 2.13B 3.86B 3.86B 5.03B 4.51B 6.31B 6.41B -
Total Liabilities 2.91B 3.96B 4.95B 8.25B 8.80B 11.47B 12.39B 17.87B 20.41B -
Stockholder' Equity 1.20B 394.12M 272.78M 23.09M 175.97M 528.49M 855.76M 2.40B 2.01B 1.66B
Current Ratio 1.10 0.99 1.11 1.59 1.71 1.81 2.30 2.19 2.54 -
TL-to-TA 0.71 0.91 0.95 1.00 0.98 0.96 0.94 0.88 0.91 -

Consistent Reinvestment of Profits over the past 10 years

ADS has consistently retained profits. This may put ADS in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, ADS can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Retained Earnings 682.90M 900.30M 1.03B 815.72M 1.13B 1.55B 2.05B 2.54B 3.09B 3.49B
Retained Earnings Growth - 31.83% 14.74% -21.04% 38.65% 37.33% 31.94% 23.98% 21.71% 13.01%

Competitive Industry over the past 10 years

ADS is likely operating in an industry with medium to low barriers to entry. This may mean that ADS doesn't have a characteristic that's hard to replicate, such as exclusive distribution, branding or the ability to keep costs low. If Gross Margins are at least satisfactory, it's likely that ADS invests heavily in R&D and Sales, General & Administrative expenses.

Only $8.43 of every $100 of Revenue have been profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Net Income 164.06M 217.39M 143.73M 193.74M 315.29M 422.26M 496.17M 516.14M 605.43M -
divided by
Revenue 2.29B 2.03B 1.96B 2.79B 3.17B 3.64B 4.32B 5.30B 6.44B 7.14B
Net Profit Margin 7.16% 10.73% 7.32% 6.94% 9.94% 11.60% 11.49% 9.73% 9.40% -

Varying Pricing Power over the past 10 years

ADS has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. However, there is a substantial variation in their Gross Profit Margins from year-to-year, which indicates inconsistent performance. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

$40.14 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Gross Profit 660.16M 683.23M 610.20M 1.25B 3.17B 1.53B 1.77B 2.08B 2.63B -
divided by
Revenue 2.29B 2.03B 1.96B 2.79B 3.17B 3.64B 4.32B 5.30B 6.44B 7.14B
Gross Margin 28.81% 33.74% 31.06% 44.64% 100.00% 42.15% 40.98% 39.30% 40.77% -

Medium Capital Intensity over the past 10 years

ADS has used a reasonable amount of their financial resources to invest in facilities and equipment required to produce its goods and services. This isn't perfect, but it shouldn't be an area of concern unless this number is strongly trending upwards.

34.09% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Capital Expenditure 116.65M 49.56M 52.97M 68.76M 73.50M 116.46M 135.38M 158.69M 191.68M 207.00M
divided by
Net Income 164.06M 217.39M 143.73M 193.74M 315.29M 422.26M 496.17M 516.14M 605.43M -
Capital Expenditure Ratio 71.10% 22.80% 36.85% 35.49% 23.31% 27.58% 27.28% 30.75% 31.66% -

No Dividend History over the past 10 years

ADS has never distributed dividends or has recently suspended their dividend distribution.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Dividend Paid - - - - - - - - - -
divided by
Shares Outstanding 80.81M 73.64M 57.71M 55.71M 57.80M 64.14M 66.87M 62.45M 62.30M 58.90M
Dividend Paid Per Share - - - - - - - - - -
Price at Year End 73.67 46.00 65.05 71.32 103.84 144.02 260.05 286.88 276.77 228.50
Dividend Yield - - - - - - - - - -

Strong History of Stock Buybacks over the past 10 years

ADS has a strong history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Shares Outstanding 80.81M 73.64M 57.71M 55.71M 57.80M 64.14M 66.87M 62.45M 62.30M 58.90M
Stock Bought Back - 9.74% 27.61% 3.58% -3.62% -9.88% -4.07% 7.08% 0.23% 5.77%
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