Contrasting Alliance Data Systems (ADS) and Pra Group (PRAA)

Alliance Data Systems (NYSE: ADS) and Pra Group (NASDAQ:PRAA) are both business services companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, analyst recommendations, earnings, institutional ownership, profitability, risk and dividends.

Institutional & Insider Ownership

94.6% of Alliance Data Systems shares are owned by institutional investors. 2.6% of Alliance Data Systems shares are owned by company insiders. Comparatively, 2.1% of Pra Group shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Alliance Data Systems and Pra Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Alliance Data Systems $7.14 billion 2.14 $432.30 million $9.43 29.31
Pra Group $830.58 million 1.93 $85.09 million $1.25 28.32

Alliance Data Systems has higher revenue and earnings than Pra Group. Pra Group is trading at a lower price-to-earnings ratio than Alliance Data Systems, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Alliance Data Systems and Pra Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Alliance Data Systems 7.09% 62.95% 3.66%
Pra Group 7.57% 2.98% 0.90%

Risk and Volatility

Alliance Data Systems has a beta of 1.79, meaning that its share price is 79% more volatile than the S&P 500. Comparatively, Pra Group has a beta of 1.59, meaning that its share price is 59% more volatile than the S&P 500.

Dividends

Alliance Data Systems pays an annual dividend of $2.08 per share and has a dividend yield of 0.8%. Pra Group does not pay a dividend. Alliance Data Systems pays out 22.1% of its earnings in the form of a dividend.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Alliance Data Systems and Pra Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alliance Data Systems 3 7 9 0 2.32
Pra Group 2 3 0 0 1.60

Alliance Data Systems presently has a consensus target price of $264.94, indicating a potential downside of 4.14%. Pra Group has a consensus target price of $40.00, indicating a potential upside of 12.99%. Given Pra Group’s higher possible upside, analysts plainly believe Pra Group is more favorable than Alliance Data Systems.

Summary

Alliance Data Systems beats Pra Group on 13 of the 16 factors compared between the two stocks.

Alliance Data Systems Company Profile

Alliance Data Systems Corporation is a provider of data-driven marketing and loyalty solutions serving consumer-based businesses in a range of industries. The Company offers a portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, end-to-end marketing services, analytics and creative services, direct marketing services, and private label and co-brand retail credit card programs. The Company operates through three segments: LoyaltyOne, which provides coalition and short-term loyalty programs through the Company’s Canadian AIR MILES Reward Program and BrandLoyalty Group B.V. (BrandLoyalty); Epsilon, which provides end-to-end, integrated direct marketing solutions, and Card Services, which provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services for the Company’s private label and co-brand retail credit card programs.

Pra Group Company Profile

PRA Group, Inc. (PRA Group) is a financial and business services company with operations in the Americas and Europe. The Company’s primary business is the purchase, collection and management of portfolios of nonperforming loans. The Company operates through the account receivables management segment. It also provides fee-based services, such as vehicle location, skip tracing and collateral recovery for auto lenders, government entities and law enforcement; revenue administration, audit and revenue discovery/recovery services for local government entities; class action claims recovery services and purchases; servicing of consumer bankruptcy accounts in the United States, and contingent collections of nonperforming loans in Europe and South America. The Company’s portfolio of nonperforming loans includes a set of accounts that can be categorized by asset type, age and size of account, level of previous collection efforts, payment history, and geography.

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