In this article we look into Alliance Data Systems (ADS, Financial), a company that leads the list of GuruFocus Predictable Companies.
If you follow the research we have done over the years, check the tutorials at the knowledge center, you will know that one important emphasis in our value strategies is to invest in companies with predictable revenue and earnings growth. We have since ranked the predictability of all companies in our database, and developed strategies that invest in the undervalued predictable companies and wide-moat, low-debt companies that young Warren Buffett and Charlie Munger would like. Our backtesting and model portfolios have found these companies can deliver returns that far exceed the market average.
It is not surprising that those companies can deliver above average returns. The companies have consistently grown their revenue and earnings at predictable rates. If the companies can control their debt levels and maintain their profit margins while growing, “the stock prices will follow,”, as pointed out by Warren Buffett.
In this series of articles we will highlight the stocks that have high predictability rank, using the tools we offer to analyze the quality of businesses, the valuation and the potential risks of investing in the stocks. The first company here we discuss is Alliance Data Systems (ADS).
The Business
Alliance Data Systems Corporation is a provider of transaction services, credit services and marketing services to retail companies in North America. Alliance Data Systems has a market cap of $4.28 billion; its shares were traded around $83.61 with a P/E ratio of 15.4 and P/S ratio of 1.5. Alliance Data Systems had an annual average earnings growth of 27.3% over the past 10 years. GuruFocus rated Alliance Data Systems the business predictability rank of 5-star.
If you look at the growth in the revenue and earnings of Alliance Data Systems, you will understand why we rank it 5-star. Please see the chart below for the 10-year history of the revenue and earnings growth.
If you follow the research we have done over the years, check the tutorials at the knowledge center, you will know that one important emphasis in our value strategies is to invest in companies with predictable revenue and earnings growth. We have since ranked the predictability of all companies in our database, and developed strategies that invest in the undervalued predictable companies and wide-moat, low-debt companies that young Warren Buffett and Charlie Munger would like. Our backtesting and model portfolios have found these companies can deliver returns that far exceed the market average.
It is not surprising that those companies can deliver above average returns. The companies have consistently grown their revenue and earnings at predictable rates. If the companies can control their debt levels and maintain their profit margins while growing, “the stock prices will follow,”, as pointed out by Warren Buffett.
In this series of articles we will highlight the stocks that have high predictability rank, using the tools we offer to analyze the quality of businesses, the valuation and the potential risks of investing in the stocks. The first company here we discuss is Alliance Data Systems (ADS).
The Business
Alliance Data Systems Corporation is a provider of transaction services, credit services and marketing services to retail companies in North America. Alliance Data Systems has a market cap of $4.28 billion; its shares were traded around $83.61 with a P/E ratio of 15.4 and P/S ratio of 1.5. Alliance Data Systems had an annual average earnings growth of 27.3% over the past 10 years. GuruFocus rated Alliance Data Systems the business predictability rank of 5-star.
If you look at the growth in the revenue and earnings of Alliance Data Systems, you will understand why we rank it 5-star. Please see the chart below for the 10-year history of the revenue and earnings growth.