Trade-Ideas LLC identified

Alliance Data Systems

(

ADS

) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Alliance Data Systems as such a stock due to the following factors:

  • ADS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $148.0 million.
  • ADS has traded 653,278 shares today.
  • ADS is trading at 18.63 times the normal volume for the stock at this time of day.
  • ADS is trading at a new low 13.07% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on ADS:

TheStreet Recommends

Alliance Data Systems Corporation provides marketing and loyalty solutions in the United States and internationally. The company operates through three segments: LoyaltyOne, Epsilon, and Private Label Services and Credit. ADS has a PE ratio of 33. Currently there are 15 analysts that rate Alliance Data Systems a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Alliance Data Systems has been 413,100 shares per day over the past 30 days. Alliance Data Systems has a market cap of $15.3 billion and is part of the services sector and diversified services industry. The stock has a beta of 1.41 and a short float of 4.2% with 3.99 days to cover. Shares are down 9.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Alliance Data Systems as a

buy

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 19.9%. Since the same quarter one year prior, revenues rose by 20.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $467.41 million or 22.94% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -24.55%.
  • 43.30% is the gross profit margin for ALLIANCE DATA SYSTEMS CORP which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ADS's net profit margin of 8.08% significantly trails the industry average.
  • ALLIANCE DATA SYSTEMS CORP's earnings per share declined by 24.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALLIANCE DATA SYSTEMS CORP increased its bottom line by earning $7.87 versus $7.43 in the prior year. This year, the market expects an improvement in earnings ($15.02 versus $7.87).
  • The change in net income from the same quarter one year ago has exceeded that of the IT Services industry average, but is less than that of the S&P 500. The net income has decreased by 21.8% when compared to the same quarter one year ago, dropping from $164.24 million to $128.43 million.

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