ADS – Market expectations are for Uniform ROA to reach new lows, but management is confident about customers, liquidity, and debt

June 25, 2020

  • Alliance Data Systems Corporation (ADS:USA) currently trades at a historical low relative to UAFRS-based (Uniform) earnings, with a 6.0x Uniform P/E. At these levels, the market has bearish expectations for the firm, but management is confident about customer payments, their liquidity, and debt

  • Specifically, management is confident they will adjust their loan loss reserves, if necessary, based on the fluid economic outlook. They are also confident that their forbearance programs will continue to grow, and that their consumers are actively paying their obligations. In addition, they are confident they are cutting expenses to enhance their capital position, that they are looking for sustainable top-line and bottom-line growth in the long-term, and that they have plenty of cash and liquidity. Furthermore, they are confident they can pay their debt service

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