Credit Acceptance (CACC) AI Stock Analysis

• Market Cap: $5.55B
• Dividend Yield: N/A
• Average Volume (3M): 89.34K
• Price to Earnings (P/E): 23.4
• Beta (1Y): 1.31
• Revenue Growth: 13.70%
• EPS Growth: -9.00%
• Country: US
• Employees: 2,431
• Sector: Financial
• Sector Strength: 81
• Industry: Financial - Credit Services
• EPS (TTM): 19.86
• Shares Outstanding: 12,031,647
• 10 Day Avg. Volume: 127,001
• 30 Day Avg. Volume: 89,341
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 3.17
• Price to Cash Flow (P/CF): 4.90
• P/FCF Ratio: 4.90
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $460.00
• Price Target Upside: -1.08% Downside
• Rating Consensus: Moderate Sell
• Number of Analyst Covering: 2

Credit Acceptance Corporation demonstrates strong financial performance with robust revenue growth and efficient operations. However, technical indicators suggest a bearish trend, and valuation metrics indicate the stock is expensive. The latest earnings call highlighted both achievements and challenges, while corporate events reflect a positive strategic direction. Overall, the company is well-positioned but faces headwinds in market sentiment and valuation.

Positive Factors

Cash Collections

The level of deterioration in cash collections is slowing, which is expected to result in lower provisions and higher adjusted revenues and earnings.

Financial Performance

The beat was driven by lower provision, modestly higher revenue, and lower operating expenses.

Negative Factors

Cash Flow Forecast

CACC lowered its forecasted net cash flow rate again this quarter, marking seven consecutive quarters of decline.

Earnings

CACC reported Q3 diluted GAAP EPS of $6.35 vs our estimate of $7.43 and FS consensus of $7.77.

Loan Originations

Weak originations likely driven by scorecard change and increased competition.

Credit Acceptance Business Overview & Revenue Model

Company Description

Credit Acceptance Corporation provides financing programs, and related products and services to independent and franchised automobile dealers in the United States. The company advances money to dealers in exchange for the right to service the underlying consumer loans; and buys the consumer loans from the dealers and keeps various amounts collected from the consumers. It is also involved in the business of reinsuring coverage under vehicle service contracts sold to consumers by dealers on vehicles financed by the company. The company was founded in 1972 and is headquartered in Southfield, Michigan.

How the Company Makes Money

Credit Acceptance makes money through its unique business model that involves partnering with automobile dealerships to provide auto financing solutions for consumers who may not qualify for traditional loans. The company generates revenue through finance charges on the loans it underwrites, as well as servicing fees collected from the dealerships. Key revenue streams include interest income from the loan portfolio and servicing income from dealer agreements. Credit Acceptance's earnings are influenced by factors such as interest rate fluctuations, loan default rates, and the quality of its dealer relationships. The company's profitability is also supported by its expertise in risk management and collections, allowing it to maintain a stable income flow even in challenging economic conditions.

Credit Acceptance Financial Statement Overview

Summary

Credit Acceptance demonstrates strong revenue growth and efficient operational management with impressive gross and EBIT margins. The balance sheet benefits from zero debt, though the equity ratio suggests a need for balanced financing strategies. Cash flows are healthy, with high conversion ratios, but there are potential concerns from declining free cash flow growth.

Income Statement

Credit Acceptance has shown a strong revenue growth rate of 13.7% year-over-year from 2023 to 2024. The company maintained a high gross profit margin of 100%, indicating effective management of cost of goods. However, the net profit margin decreased from 15.0% to 11.5%, signifying increased expenses or other factors affecting net income. The EBIT margin showed a substantial increase from 23.1% to 76.8%, highlighting improved operational efficiency.

Balance Sheet

The balance sheet reveals a strong equity position with a debt-to-equity ratio of 0, indicating no debt burden as of 2024. The return on equity (ROE) is 14.2%, reflecting decent profitability relative to shareholder equity. The equity ratio stands at 19.8%, suggesting moderate leverage. While the lack of debt is a strength, the equity ratio indicates the need for careful management of equity financing.

Cash Flow

The company exhibited a slight decline in free cash flow from 2023 to 2024. Despite this, the operating cash flow to net income ratio is robust at 4.6, suggesting strong cash generation relative to net income. The free cash flow to net income ratio is high at 4.6, emphasizing efficient cash conversion. However, the negative trend in free cash flow growth rate may warrant attention.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
2.16B	1.90B	1.18B	1.80B	1.62B
	Gross Profit
1.36B	1.28B	709.40M	1.38B	1.20B
	EBIT
830.30M	440.10M	686.10M	1.23B	540.50M
	EBITDA
352.90M	373.90M	711.70M	1.26B	564.30M
	Net Income Common Stockholders
247.90M	286.10M	535.80M	958.30M	421.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
951.40M	13.20M	7.70M	23.30M	16.00M
	Total Assets
8.85B	7.61B	6.90B	7.05B	7.49B
	Total Debt
6.35B	5.07B	4.59B	4.62B	4.61B
	Net Debt
-845.00M	5.05B	4.58B	4.59B	4.59B
	Total Liabilities
7.11B	5.86B	5.28B	5.23B	5.19B
	Stockholders Equity
1.75B	1.75B	1.62B	1.82B	2.30B
Cash Flow		Free Cash Flow
1.14B	1.20B	1.24B	1.06B	976.70M
	Operating Cash Flow
1.14B	1.20B	1.24B	1.07B	985.20M
	Investing Cash Flow
-1.72B	-1.42B	-460.60M	437.30M	-673.50M
	Financing Cash Flow
957.30M	266.20M	-794.60M	-1.47B	-433.20M

Credit Acceptance Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 465.03
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CACC, the sentiment is Negative. The current price of 465.03 is below the 20-day moving average (MA) of 495.23, below the 50-day MA of 499.66, and below the 200-day MA of 483.69, indicating a bearish trend. The MACD of 7.15 indicates Negative momentum. The RSI at 62.98 is Neutral, neither overbought nor oversold. The STOCH value of 87.62 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CACC.

Credit Acceptance Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SLM	76 Outperform	$5.37B	9.52	30.11%	1.88%	4.90%	11.33%
JXN	76 Outperform	$5.11B	5.99	9.49%	4.12%	3.55%	8.91%
CACC	73 Outperform	$5.55B	23.42	14.15%	―	13.70%	-9.00%
LNC	67 Neutral	$5.11B	1.63	43.24%	6.01%	47.95%	―
OMF	66 Neutral	$4.90B	9.68	15.96%	10.14%	7.96%	-20.11%
Sector *	63 Neutral	$12.88B	9.21	9.18%	4.78%	16.30%	-8.66%
STEP	54 Neutral	$5.09B	103.13	-26.81%	2.12%	118.79%	-285.61%

Credit Acceptance Corporate Events

Credit Acceptance Highlights Commitment to Accessible Vehicle Financing

The recent shareholder letter from Credit Acceptance highlights the company’s commitment to making vehicle ownership accessible to consumers with poor or no credit history. By partnering with dealers, Credit Acceptance has facilitated vehicle financing for individuals like Vivien H., who regained her independence after securing a vehicle loan. The company has also helped dealers like Nate W. expand their businesses by offering financing options to a broader customer base. Credit Acceptance’s business model, focused on economic profit and strong cultural values, has driven its success over the years, allowing it to consistently earn returns above its cost of capital and invest in its core business.