Based on the aggregated intelligence of 165,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Alliance Data Systems (NYSE: ADS), which manages credit card programs for retailers, has received the dreaded one-star ranking.

With that in mind, let's take a closer look at ADS' business and see what CAPS investors are saying about the stock right now.

ADS facts

Headquarters (Founded)

Dallas (1996)

Market Cap

$3.07 billion

Industry

Data processing and outsourced services

Trailing-12-Month Revenue

$2.36 billion

Management

CEO Edward Heffernan (since 2009)

CFO Charles Horn (since 2009)

Return on Capital (Average, Past 3 Years)

9.7%

Compound Annual Revenue and Net Income Growth (Over Past 3 Years)

6.1% and (1.6%)

Cash/Debt

$250 million / $6.3 billion

1-Year Return

14.7%

Competitors

American Express (NYSE: AXP)

Citigroup (NYSE: C)

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 15% of the 189 members who have rated ADS believe the stock will underperform the S&P 500 going forward. These bears include CAPS All-Stars latimerburned and TMFDeej, both of whom are ranked in the top 5% of our community.

Earlier this month, latimerburned nicely summed up the ADS bear case:

Negative [tangible book value]. [Blackstone Group] didn't like what they saw when they resinded their takeover offer. New fed regulations. Yeah, not a good recipe for success.

Ever since private equity firm Blackstone Group withdrew its $81.75 takeover offer of ADS amid the subprime mess, skepticism has increasingly grown on Wall Street about ADS' lending practices. In fact, more than 37% of ADS' 53.2 million shares are currently being shorted. Most recently, a Barron's article noted that while financial giants like Citigroup are steadily looking to curtail their low-income consumer lending, ADS' credit card portfolio actually grew 20% over the past year.

Growth is usually good, of course, but as TMFDeej explains in this excerpt from a much longer post, it's just another red-flag when it comes to ADS:

Alliance Data Systems is essentially a highly leveraged credit card company. Alliance provides the affinity credit cards for a number of retailers, including stores like Victoria's Secret and Charming Shoppes. ...

ADS's credit card business appears to be deteriorating and it uses aggressive accounting practices. For example, Alliance runs a Canadian customer-loyalty program called Air Miles. ADS assumes that a whopping 28% of the points that it issues to people who are enrolled in this program will go unused. Twenty-eight percent. American Express runs a similar type of program and it assumes that only 10% of the points that it issues will go unused. ...

Last month ADS disclosed that it has amended the terms of a $700 million bank that it has so that it is no longer required to pay any principal or interest until the loan matures in 2012. The people who are bearish on the company see this as a sign that it is having serious financial problems.

Add a federally-mandated reduction in credit card fees into the mix and a consumer that still reeling and you have one messed up company.

What do you think about ADS, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!