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Why Should You Hold Alliance Data (ADS) in Your Portfolio?

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Alliance Data Systems Corporation (ADS - Free Report) is poised for growth on the strength of its Card Service segment and solid capital position. The stock carries a favorable VGM Score of A. The expected long-term earnings growth is pegged at 6.2%.

Return on equity of 41.9% in the trailing twelve months was better than the industry average of 33.4%, reflecting the company’s efficiency in utilizing shareholders’ fund.  

The company is expected to continue benefiting from current trends in consumer-based business shifting their marketing spend to data-driven marketing strategies. Organic growth has been a key strength of Alliance Data.  Solid receivables growth in Card Services along with strong LoyaltyOne should drive the top line of the firm.

Alliance Data continues to focus more on its market-leading high-growth, high-ROI Card Service segment, which contributes the lion’s share of its total revenues. Alliance Data divested Epsilon to Publicis Groupe for $4.4 billion in July 2019. The divestiture also provided significant liquidity to return capital to shareholders and improve capital structure.

The company also makes strategic acquisitions that expands international footprint, consolidates its position in digital agency, boosts the LoyaltyOne business, strengthens position in the digital marketing channels, and expands its Omni-Channel distribution capabilities.

Also, Alliance Data has a strong balance sheet by virtue of its solid cash position. The company’s current dividend yield of 1.8% betters the industry average of 0.6%. This makes the stock an attractive pick for yield-seeking investors. Alliance Data carries a Zacks Rank #3 (Hold).

Shares of the company have lost 57.1% against the industry’s increase of 0.3%.


 

Stocks to Consider

Some better-ranked financial transaction service providers are EVO Payments, Inc. (EVOP - Free Report) , Equifax Inc. (EFX - Free Report) and Green Dot Corporation (GDOT - Free Report) , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EVO Payments operates as an integrated merchant acquirer and payment processor in the Americas and Europe. The company outpaced estimates in the last four quarters, the positive surprise being 31.32%, on average.

Equifax provides information solutions and human resources business process outsourcing services for businesses, governments, and consumers.  The company outpaced estimates in the last four quarters, the positive surprise being 4.23%, on average.

Green Dot operates as a financial technology and bank holding company in the United States. The company outpaced estimates in the last four quarters, the positive surprise being 247.59%, on average.

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