Reasons Why Investors Should Hold Alliance Data (ADS) Stock
Zacks Investment Research | Mar 26, 2020 11:10PM ET
Alliance Data Systems Corporation (NYSE:ADS) is well-poised for growth, owing to its strategic acquisitions and efficient capital deployment.
Banking on solid financial strength and flexibility, Alliance Data has pursued strategic acquisitions to boost its international expansion, consolidate its position in digital agency, boost the LoyaltyOne business, strengthen position in the digital marketing channels, expand its omni-channel distribution capabilities and widen presence in Brazil.
The company remains focused on returning value to its shareholders. In order to limit the adverse effect of foreign exchange, it uses share repurchases as a tool and focuses more on share buybacks than mergers and acquisitions. In July 2019, the board approved a new share buyback program of $1.1 billion. Its current dividend yield of 6.7% betters the industry average of 0.7%.
Alliance Data Systems’ return on equity is 44.1% in the trailing 12-month period, higher than the industry average of 38%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing shareholders’ funds.
The Zacks Consensus Estimate for 2020 and 2021 earnings per share is pegged at $20.49 and $22.71, indicating increase of nearly 22.1% and 10.8%, respectively from the year-ago reported figure. The expected long-term earnings growth rate is 12.10%. The stock also carries a favorable Zacks Investment Research
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