what is the main catalyst for ADS to be recognized by Mr Market? Is it more bookings (more customers)? Revenue? or just normal bottom line growth?
I would argue that ADS right now is recognized by Mr Market correctly. Mr Market has stripped off the premium from phony cash earnings and values the company based on GAAP earnings, just like its peers.
I disagree, I think ADS looks very cheap for a 30% ROE company that has grown receivables 14% plus average since 2006. Cash EPS mostly adds back amortization of purchased intangibles. They acquired Conversant for $2.3B which was mostly intangibles assets. With Epsilon gone the delta between "Cash EPS" and GAAP should compress.
We'll see if the management change up helps but I think they mostly sold off on disappointment in the stock repo and the tax leakage, not to mention who wants to own a credit card company exposed to retail with a possible recession coming. SYF, COF and DFS trade at similar multiples but i would argue ADS has a higher ROE and growth profile and should trade at a premium.
NCOs hit 9.3% in 2009 and 8.9% in 2010 and then dropped to sub 5% for 5 years so they would likely over-earn post a recession but i think a lot of people just don't want to own financials as they assume the next recession looks like the GFC.