Trade-Ideas: Alliance Data Systems (ADS) Is Today's Unusual Social Activity Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Alliance Data Systems ( ADS) as an unusual social activity candidate. In addition to specific proprietary factors, Trade-Ideas identified Alliance Data Systems as such a stock due to the following factors:

  • ADS has 19x the normal benchmarked social activity for this time of the day compared to its average of 1.29 mentions/day.
  • ADS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $156.2 million.

Identifying stocks with 'Unusual Social Activity' tends to be a valuable process for traders looking to capitalize on the 'talk of the town' stocks that are basking in far more attention from the StockTwits financial community than normal. Good press? Bad press? It ultimately doesn't matter if it's good or bad if you know how to trade around the sentiment. Certain hedge funds use such data for their proprietary algorithms and it is not uncommon to see shared social sentiment play itself out in a stock's price trend.

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More details on ADS:

Alliance Data Systems Corporation provides marketing and loyalty solutions in the United States, Canada, and other countries. ADS has a PE ratio of 31.7. Currently there are 9 analysts that rate Alliance Data Systems a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Alliance Data Systems has been 627,600 shares per day over the past 30 days. Alliance Data Systems has a market cap of $16.5 billion and is part of the services sector and diversified services industry. The stock has a beta of 1.62 and a short float of 5.4% with 5.13 days to cover. Shares are up 5.8% year-to-date as of the close of trading on Monday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 20.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ALLIANCE DATA SYSTEMS CORP has improved earnings per share by 36.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ALLIANCE DATA SYSTEMS CORP increased its bottom line by earning $7.43 versus $6.60 in the prior year. This year, the market expects an improvement in earnings ($12.44 versus $7.43).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the IT Services industry average. The net income increased by 23.6% when compared to the same quarter one year prior, going from $132.88 million to $164.24 million.
  • Net operating cash flow has increased to $380.18 million or 41.66% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.44%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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