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Credit Acceptance Corp. (CACC)
NASDAQ:CACC
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Credit Acceptance
(NASDAQ:CACC)71Outperform
Positive Factors
Financial Performance
The beat was driven by lower provision, modestly higher revenue, and lower operating expenses.
Negative Factors
Earnings Report
CACC reported Q3 diluted GAAP EPS of $6.35 vs our est $7.43 and FS cons of $7.77.
Forecast and Projections
CACC lowered its forecasted net cash flow rate again this quarter, marking seven consecutive quarters of decline.
Credit Acceptance (CACC) vs. S&P 500 (SPY)
Market Cap
$5.79B
Dividend YieldN/A
Average Volume (3M)66.90K
Price to Earnings (P/E)24.9
Beta (1Y)1.42
Revenue Growth13.70%
EPS Growth-9.00%
CountryUS
Employees2,431
SectorFinancial
Sector Strength93
IndustryCredit Finance
Share Statistics
EPS (TTM)19.86
Shares Outstanding12,031,647
10 Day Avg. Volume70,684
30 Day Avg. Volume66,899
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)3.08
Price to Cash Flow (P/CF)4.70
P/FCF Ratio4.70
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$460.00Price Target Upside-6.87% Downside
Rating ConsensusModerate Sell
Number of Analyst Covering2
Credit Acceptance Business Overview & Revenue Model
Company DescriptionCredit Acceptance Corporation (CACC) is a financial services company that specializes in offering auto loans and related products. Founded in 1972 and headquartered in Southfield, Michigan, the company primarily operates in the United States, catering to individuals with limited or poor credit histories. Credit Acceptance provides financing programs to automobile dealerships, which in turn offer indirect vehicle loans to consumers. The company's mission is to give consumers a second chance to finance a vehicle while enabling auto dealers to expand their customer base by reaching underserved markets.
How the Company Makes MoneyCredit 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, as evidenced by impressive gross and EBIT margins. The balance sheet is characterized by zero debt, enhancing financial stability, though the equity ratio suggests a need for balance in financing strategies. Cash flows remain healthy, with high conversion ratios, yet potential concerns arise from declining free cash flow growth. The company is well-positioned but should focus on improving net margins and sustaining 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.82
Very Positive
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.75
Positive
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.79
Positive
| 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
Positive
493.91
Price Trends
491.44
Positive
478.99
Positive
482.47
Positive
Market Momentum
-5.28
Positive
50.38
Neutral
67.62
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CACC, the sentiment is Positive. The current price of 493.91 is below the 20-day moving average (MA) of 496.52, above the 50-day MA of 491.44, and above the 200-day MA of 482.47, indicating a neutral trend. The MACD of -5.28 indicates Positive momentum. The RSI at 50.38 is Neutral, neither overbought nor oversold. The STOCH value of 67.62 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CACC.
Credit Acceptance Risk Analysis
Credit Acceptance disclosed 30 risk factors in its most recent earnings report. Credit Acceptance reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Credit Acceptance Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Performance Comparison
CACC
Credit Acceptance
493.91
-56.36
-10.24%
ALLY
Ally Financial
34.65
-1.69
-4.65%
Credit Acceptance Earnings Call Summary
Earnings Call Date: Jan 30, 2025 | % Change Since: -3.92% | Next Earnings Date: May 5, 2025
Earnings Call Sentiment Neutral
The earnings call revealed a mix of positive developments such as record high loan portfolio and increased market share, alongside challenges like slowing growth and underperformance in certain vintages. While there are notable achievements, the presence of significant challenges results in a balanced overall sentiment.Highlights
Record High Loan Portfolio
The loan portfolio reached a new record high of $8.9 billion on an adjusted basis, up 15% from last year.
Increased Market Share
Market share in the core segment of used vehicles financed by subprime consumers increased to 6.1% year-to-date through November, compared to 4.8% for the same period in 2023.
Expansion in Dealer Network
The company added 902 new dealers in the quarter, reaching the highest number of active dealers ever for a fourth quarter with 10,149 dealers.
Awards and Recognition
Received five awards from Newsweek, Monster, Fortune, Detroit Free Press, and Computerworld recognizing Credit Acceptance as a great place to work, totaling 13 workplace awards in 2024.
Lowlights
Decline in Forecasted Collections
A small decline of 0.3% or $31 million in forecasted net cash flows, with the 2022 vintage continuing to underperform expectations.
Slowing Growth
Growth slowed significantly, with volume per dealer declining about 3.7% versus Q4 of 2023.
Impact of Scorecard Changes
Scorecard changes in Q3 resulted in lower advance rates, contributing to the slower growth and a decline in unit volume.
Legal Expenses Fluctuation
A relatively large sequential decline in G&A expense primarily related to fluctuations in legal expenses.
Company Guidance
During the Credit Acceptance Corporation fourth quarter 2024 earnings call, the company provided guidance highlighting several key metrics and performance indicators. The loan portfolio reached a record $8.9 billion on an adjusted basis, marking a 15% increase from the previous year. Market share in the core segment of used vehicles financed by subprime consumers rose to 6.1% year-to-date through November, compared to 4.8% in 2023. Despite slower growth, this quarter still recorded the second-highest Q4 unit and dollar volume ever. Collections totaled $1.3 billion, while portfolio profit payments amounted to $65 million. The company financed 78,911 contracts and added 902 new dealers, achieving the largest number of active dealers for a fourth quarter at 10,149. The company also received a total of 13 workplace awards for 2024, a record number, reinforcing its commitment to a positive work environment.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.