Critical Contrast: Information Services Group (III) versus Alliance Data Systems (ADS)

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

Profitability

This table compares Alliance Data Systems and Information Services 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%
Information Services Group -2.97% -4.66% -1.21%

Dividends

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

Earnings and Valuation

This table compares Alliance Data Systems and Information Services Group’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Alliance Data Systems $7.14 billion 1.96 $432.30 million $9.43 26.88
Information Services Group $216.50 million 0.84 -$6.50 million ($0.20) -20.85

Alliance Data Systems has higher revenue and earnings than Information Services Group. Information Services 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.

Risk & Volatility

Alliance Data Systems has a beta of 1.79, meaning that its stock price is 79% more volatile than the S&P 500. Comparatively, Information Services Group has a beta of 0.37, meaning that its stock price is 63% less volatile than the S&P 500.

Insider and Institutional Ownership

94.6% of Alliance Data Systems shares are owned by institutional investors. Comparatively, 42.1% of Information Services Group shares are owned by institutional investors. 2.6% of Alliance Data Systems shares are owned by company insiders. Comparatively, 12.0% of Information Services Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Alliance Data Systems and Information Services Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alliance Data Systems 3 6 8 0 2.29
Information Services Group 0 0 2 0 3.00

Alliance Data Systems currently has a consensus price target of $258.50, indicating a potential upside of 1.98%. Information Services Group has a consensus price target of $6.50, indicating a potential upside of 55.88%. Given Information Services Group’s stronger consensus rating and higher probable upside, analysts plainly believe Information Services Group is more favorable than Alliance Data Systems.

Summary

Alliance Data Systems beats Information Services Group on 12 of the 16 factors compared between the two stocks.

About Alliance Data Systems

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.

About Information Services Group

Information Services Group, Inc. is a technology insights, market intelligence and advisory services company. The Company operates in the segment of fact-based sourcing advisory services. It supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services with a focus on information technology, business process transformation, program management services and enterprise resource planning. It offers service lines, including research, consulting, managed services, network carrier services, robotic process automation (RPA), outsourcing advisory and provider services. It specializes in digital transformation services, including automation, cloud and data analytics; managed governance and risk services; network carrier services; technology strategy and operations design; change management, and technology research and analysis.

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