What Can We Expect From Alliance Data Systems Corporation’s (NYSE:ADS) Earnings Over The Next Year?

Looking at Alliance Data Systems Corporation’s (NYSE:ADS) earnings update in June 2019, it seems that analyst forecasts are fairly pessimistic, with profits predicted to drop by 1.1% next year compared with the past 5-year average growth rate of 16%. Presently, with latest-twelve-month earnings at US$963m, we should see this fall to US$952m by 2020. Below is a brief commentary around Alliance Data Systems’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

See our latest analysis for Alliance Data Systems

How will Alliance Data Systems perform in the near future?

Longer term expectations from the 20 analysts covering ADS’s stock is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

NYSE:ADS Past and Future Earnings, September 12th 2019
NYSE:ADS Past and Future Earnings, September 12th 2019

By 2022, ADS’s earnings should reach US$979m, from current levels of US$963m, resulting in an annual growth rate of 7.4%. EPS reaches $19.84 in the final year of forecast compared to the current $17.54 EPS today. With a current profit margin of 12%, this movement will result in a margin of 14% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Alliance Data Systems, I’ve put together three important aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Alliance Data Systems worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Alliance Data Systems is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Alliance Data Systems? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.