Author Topic: ADS - Alliance Data Systems  (Read 138759 times)

LowIQinvestor

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Re: ADS - Alliance Data Systems
« Reply #190 on: December 13, 2018, 08:55:33 AM »
I went back over the last 10 years to see various valuation metrics ( PE, Cashflow multiple, P/S, EV/EBITDA )

ADS is currently trading at or below on nearly every metric than it did in the 2008-2009 great recession!


Hope they are buying back shares right now. This is silly


frommi

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Re: ADS - Alliance Data Systems
« Reply #191 on: December 13, 2018, 09:22:50 AM »
I went back over the last 10 years to see various valuation metrics ( PE, Cashflow multiple, P/S, EV/EBITDA )

ADS is currently trading at or below on nearly every metric than it did in the 2008-2009 great recession!


Hope they are buying back shares right now. This is silly

Lowest P/E was 5 in 2008/2009 and P/B 2.88. Thats around 120$, so still 30% downside.

brycepeterson

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Re: ADS - Alliance Data Systems
« Reply #192 on: December 13, 2018, 09:47:33 AM »
Categorically it's easy to see ADS is cheap today - the whole short-term voting machine of the market has taken it & many other financials down in '18.  My guess is over course of 2019 earnings will prove stable and, with buybacks, will hover back to $200-$275.  One caveat is if you price-in consumer-led recession.  Example - today's 6% reserving in "normal economy" (per mgmt) goes to wherever you think is necessary (8%-10%?) - that would put shares lower - but some of that is being priced-in here ($175-$180). 

My comment is to just be careful using "historical multiples" from abnormal periods.  Comment above mine references 5 PE in '08-'09 and $120 floor (I don't know if 5 PE is true...taking word for it).  Late 2008 to early 2009 was a highly unusual stock price environment, when businesses were trading dirt cheap, thus I would not use that time period as a useful "floor."  Likewise, if analyzing Microsoft or Cisco today, I wouldn't use late 1990's tech bubble multiples to justify a ceiling (unless you're a "financial advisor" trying to earn commission - joking).

Steven B

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Re: ADS - Alliance Data Systems
« Reply #193 on: December 13, 2018, 12:48:18 PM »
I this Vinod made some good points up thread. Their niche does suggest that there is clear ceiling to where their advantage lies. That being said I can think of a few reasons why you wouldn't sign up dying retailers receivables isn't one of them. Do any of the longs have a rebuttal to this? I'm on the fence on $ADS, need some more work.

Also, I thought part of their strategy was to incorporate the epilson marketing capabilities to help middle tier retailers who couldn't afford to do it in their own. Now they're selling it. What gives?

frommi

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Re: ADS - Alliance Data Systems
« Reply #194 on: December 14, 2018, 06:55:40 AM »
Whats holding me back here is that Debt/EBITDA has gone up at a constant pace since more than 10 years and it looks really troubling to me right now. Any ideas why that is not a problem in the next recession?

Debt/EBITDA:
ADS: 5.8 (in 2008: 2-3)
SYF:  1.5
« Last Edit: December 14, 2018, 06:59:57 AM by frommi »

flesh

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Re: ADS - Alliance Data Systems
« Reply #195 on: December 14, 2018, 09:49:14 AM »
Ya, the 5-6b they'll get for epsilon and the 3.6b in cash on the bs. Ceo already stated that 1.9 b in debt will be taken out post epsilon sale. Also, ebitda will be going up for remainco due to what I stated in the first post of this thread plus growth.

valuedontlie

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Re: ADS - Alliance Data Systems
« Reply #196 on: December 14, 2018, 10:11:45 AM »
Whats holding me back here is that Debt/EBITDA has gone up at a constant pace since more than 10 years and it looks really troubling to me right now. Any ideas why that is not a problem in the next recession?

Debt/EBITDA:
ADS: 5.8 (in 2008: 2-3)
SYF:  1.5

How are you getting to those figures?

frommi

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Re: ADS - Alliance Data Systems
« Reply #197 on: December 14, 2018, 10:32:34 AM »
Whats holding me back here is that Debt/EBITDA has gone up at a constant pace since more than 10 years and it looks really troubling to me right now. Any ideas why that is not a problem in the next recession?

Debt/EBITDA:
ADS: 5.8 (in 2008: 2-3)
SYF:  1.5

How are you getting to those figures?

I included the debt of the card business if that is what you wanted to ask, in fact i was lazy and just looked at the numbers from gurufocus. If they sell off epsilon for 5b and use only 2b for debt reduction debt/ebitda will stay roughly the same. Looks still very aggressive to me and since the returns from the receivables are included in ebitda i prefer to look at the whole amount of debt. In 2008 debt/ebitda was way lower.

flesh

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Re: ADS - Alliance Data Systems
« Reply #198 on: December 14, 2018, 10:56:48 AM »
Whats holding me back here is that Debt/EBITDA has gone up at a constant pace since more than 10 years and it looks really troubling to me right now. Any ideas why that is not a problem in the next recession?

Debt/EBITDA:
ADS: 5.8 (in 2008: 2-3)
SYF:  1.5

How are you getting to those figures?

I included the debt of the card business if that is what you wanted to ask, in fact i was lazy and just looked at the numbers from gurufocus. If they sell off epsilon for 5b and use only 2b for debt reduction debt/ebitda will stay roughly the same. Looks still very aggressive to me and since the returns from the receivables are included in ebitda i prefer to look at the whole amount of debt. In 2008 debt/ebitda was way lower.

Ofc it's up to you to see it that way but it seems you should at least use the cash to lower your estimation of debt. There's a lot of it, and  lots of fcf to add to it as well.

glorysk87

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Re: ADS - Alliance Data Systems
« Reply #199 on: December 14, 2018, 11:34:11 AM »

I included the debt of the card business if that is what you wanted to ask, in fact i was lazy and just looked at the numbers from gurufocus. If they sell off epsilon for 5b and use only 2b for debt reduction debt/ebitda will stay roughly the same. Looks still very aggressive to me and since the returns from the receivables are included in ebitda i prefer to look at the whole amount of debt. In 2008 debt/ebitda was way lower.

Net debt is 2.2B. Up from 1.3B in 2008, but not nearly as egregious as your statement implies.

On Net Debt/EBITDA, leverage is slightly below 1.0x right now, compared to 2.2x in 2008.
« Last Edit: December 14, 2018, 11:36:03 AM by glorysk87 »