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Is Alliance Data Systems (ADS) a Great Value Stock Right Now?

Zacks Equity Research
·2-min read

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company value investors might notice is Alliance Data Systems (ADS). ADS is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.

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ADS is also sporting a PEG ratio of 0.78. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ADS's PEG compares to its industry's average PEG of 1.97. Over the past 52 weeks, ADS's PEG has been as high as 0.82 and as low as 0.09, with a median of 0.41.

Finally, our model also underscores that ADS has a P/CF ratio of 6.43. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. ADS's P/CF compares to its industry's average P/CF of 25.14. Within the past 12 months, ADS's P/CF has been as high as 9.51 and as low as 1.89, with a median of 6.12.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Alliance Data Systems is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ADS feels like a great value stock at the moment.


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Zacks Investment Research