Alliance Data Systems (ADS) has taken a pretty good nose dive since around October 2018. At the highs it was around $250, today it is sitting in the $140s. This post will be Alliance Data Systems (ADS): How Low Can the Stock Go?
We will look at the 7 fundamental parameters I look to see if a stock can be considered a growth stock. Then we will take a look at the technical analysis side using the setups I have created and use for my trades. I have no plans to own Alliance Data Systems in the next 72 hours and do not hold any positions in ADS.
Alliance Data Systems (ADS): How Low Can the Stock Go? – Fundamentals
There are 7 fundamental markers I look for in a stock. I try to only purchase growth stocks so these are the parameters I look for to see if a stock meets the majority of the markers. I prefer to have all seven fulfilled. You can it more in depth here: https://evancarthey.com/how-to-scan-for-winning-stocks-an-insiders-view-to-my-process/
- Market Cap: > $300 million
- EPS growth past 5 years: >0%
- P/E: Over 10
- EPS growth next 5 years: >0%
- Sales growth past 5 years: Over 20%
- Debt/Equity: <0.1
- Sales growth qtr over qtr: Over 5%
Does the stock meet these 7 markers?
- Market Cap: 7.62B (YES)
- EPS growth past 5 years: 18.00% (YES)
- P/E: 8.28 (NO)
- EPS growth next 5 years: 5.17% (YES)
- Sales growth past 5 years: 12.50% (NO)
- Debt/Equity: 10.69 (NO)
- Sales growth qtr over qtr: -3.40% (NO)
I used Finviz.com for the fundamental analysis screener.
With Alliance Data Systems (ADS) only hitting 3 out of the 7 fundamental parameters I look for then this definitely is not a growth stock. The Debt/Equity ratio is crazy at 10.69. Also, the sales growth quarter over quarter is very troubling. This is the 1st company in the S&P 500 that I have done these for that has a P/E under 10. I’ve not seen a company have a larger Debt/Equity than P/E ratio….haha.
Technical Analysis
In the daily chart, there is a current long trade using the 61B setup. It is currently in “free trade” territory which means the final exit will not move below the current entry price. Since price has already hit the 100% Fibonacci level then that initiated the final move of the exit which will be at the top of the teal box. That price is around $150.00 so that is the exit. Even if the price goes lower the exit does not move. All’s it means is you can get in at a better entry if the price continues to move down.
With the 1-hour chart, we are looking at the 127-162 long trade setup. This is another trade where the price has made this a “free trade.” The current exit is the top of the teal box around $149.65. But if the price goes down and hits the pink line at$140.35 then the exit will move to the top of the green box around $145.00. If the price continues to go lower then you do not move the exit any further. All a drop in price would do would get you in at a better entry. Once an exit is hit then the move is over, even if an entry hasn’t been hit yet. It will then be time to look for a new setup.
Conclusion for Alliance Data Systems
The fundamentals of Alliance Data Systems (ADS) are not very good. But if you are looking at a shorter term trade then the 1-hour chart offers the potential for a quick win. If you are more bullish in the stock then the daily chart offers another long trade setup.
Popular Links
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