Zach Shafran, manager of Ivy Science & Technology fund, likes companies that use science and technology to dramatically change what they do and how they do it. He particularly looks for firms that can grow earnings at least 20% over the next three to five years. Among his favorites is Alliance Data Systems (ADS).

The Dallas company is the offspring of a 1996 merger between Limited Brands' credit-card business and J.C. Penney's card-processing unit. Its primary business is outfitting specialty retailers with store-branded credit cards. Alliance processes transactions and accounts and offers marketing services for its clients.

Alliance is finding success in other areas as well, helping revenues grow 24% over the past year. The company's Canadian air-miles loyalty program, which involves a coalition of retailers and other sponsors, draws participation from two-thirds of Canadian households.

Shafran is particularly high on Alliance's latest enterprise: handling billing services for large utilities.

Alliance has grown through several acquisitions over the years. Its most recent purchase, announced last week, is Bigfoot Interactive, a provider of e-mail communications and marketing services mainly for large companies. Robert Dodd, an analyst at investment firm Morgan Keegan says that the acquisition improves Alliance's competition position and should boost earnings by 3 cents per share next year.

Shares have risen nearly 5% since last Wednesday.

The stock, at $42, sells for 22 times the $1.97 per share that analysts expect Alliance to earn in 2005, and 19 times the 2006 profit estimate of $2.25 per share.

--Katy Marquardt and Lisa Dixon

MORE: Kiplinger.com | Investing | Markets | Column

TOOLS:   E-Mail Article  |  Print Article  |  Reprint Article  |  Content Sales

E-MAIL ALERTS: Keep up-to-date with the latest Kiplinger has to offer

SAVE, SHARE & DISCUSS:    |   |   |   |   |   |   |   |   

ADD HEADLINES: