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Credit Acceptance Corp. (CACC)
NASDAQ:CACC

Credit Acceptance (CACC) AI Stock Analysis

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Credit Acceptance

(NASDAQ:CACC)

Rating:70Outperform
Price Target:
$537.00
▲(10.26%Upside)
Credit Acceptance's strong financial performance and strategic focus are key strengths, supported by loan portfolio growth and dealer engagement. However, challenges in market share and competition, coupled with mixed technical indicators, moderate the overall outlook. While the company is fundamentally strong, the current market dynamics require careful navigation.
Positive Factors
Financial Performance
The level of deterioration in cash collections is slowing, which is expected to result in lower provisions and higher adjusted revenues and earnings.
Revenue
The beat was driven by lower provision, modestly higher revenue, and lower operating expenses.
Negative Factors
Cash Flow
CACC lowered its forecasted net cash flow rate for the eighth consecutive quarter.
Market Share
CACC's market share fell to 5.2% from 6.0%, which is a significant concern.

Credit Acceptance (CACC) vs. SPDR S&P 500 ETF (SPY)

Credit Acceptance Business Overview & Revenue Model

Company DescriptionCredit 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 MoneyCredit Acceptance makes money through several key revenue streams. The primary source of revenue is the interest and fees charged on auto loans provided to consumers. The company purchases retail installment contracts from a network of automotive dealers, who sell vehicles to consumers and subsequently assign the loan contracts to Credit Acceptance. These contracts typically carry higher interest rates due to the subprime nature of the borrowers. Additionally, Credit Acceptance generates income from servicing fees and various other charges associated with the management and collection of these loans. The company's profitability is further supported by its underwriting and risk management practices, which are designed to mitigate potential losses from defaults. Partnerships with a wide array of dealerships across the U.S. enhance its market reach and contribute significantly to its earnings.

Credit Acceptance Earnings Call Summary

Earnings Call Date:Apr 30, 2025
(Q1-2025)
|
% Change Since: -0.08%|
Next Earnings Date:Jul 30, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a mixed quarter for Credit Acceptance Corporation, with notable achievements in loan portfolio growth and dealer engagement, alongside challenges such as declining market share, increased competition, and adjustments in forecasted net cash flows.
Q1-2025 Updates
Positive Updates
Loan Portfolio Record High
The loan portfolio reached a new record high of $9.1 billion on an adjusted basis, up 10% from Q1 last year.
Progress in Market Approach
Credit Acceptance enrolled 1,617 new dealers, reaching the second highest quarterly number of active dealers at 10,789.
Recognition for Workplace Excellence
Credit Acceptance was named a Top Workplace USA award winner for the fifth consecutive year, securing the #2 ranking among companies of their size.
Negative Updates
Decline in Market Share
Market share in core segment of used vehicles financed by sub-prime consumers decreased from 6% in the first two months of 2024 to 5.2% in the same period of 2025.
Forecasted Net Cash Flows Decline
Forecasted net cash flows declined by 0.2% or $21 million, marking the smallest decline in the last eight quarters.
Increased Competition and Lower Advance Rates
Unit volume was impacted by a Q3 2024 scorecard change resulting in lower advance rates and increased competition.
GAAP Provision Impact
There was a $76 million GAAP provision for forecast changes due to declining cash flow timing and changes in undiscounted cash flows.
Company Guidance
During the Credit Acceptance Corporation's first quarter 2025 earnings call, Chief Executive Officer Ken Booth discussed key metrics related to collections and originations. Collections showed sequential improvement, although the 2022, 2024, and 2025 vintages slightly underperformed expectations. Forecasted net cash flows declined by 0.2% or $21 million, marking the smallest decline in eight quarters. The loan portfolio reached a record high of $9.1 billion, reflecting a 10% increase from Q1 last year, despite a decrease in unit dollar volume growth. Market share in the sub-prime used vehicle segment declined to 5.2% from 6% in the same period of 2024. The company financed over 100,000 contracts, collected $1.4 billion, and paid $68 million in dealer holdback. Additionally, 1,617 dealers were enrolled, bringing the total number of active dealers to 10,789. The company also highlighted its focus on technological investment and workplace excellence, having been named a Top Workplace USA award winner for the fifth consecutive year.

Credit Acceptance Financial Statement Overview

Summary
Credit Acceptance shows strong revenue growth and effective cost management, as reflected by high gross and EBIT margins. The balance sheet is stable with no debt, but the equity ratio suggests a need for balanced financing. Cash flows are healthy with high conversion ratios, although declining free cash flow growth is a concern.
Income Statement
82
Very Positive
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
75
Positive
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
79
Positive
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
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
2.20B2.13B1.90B1.18B1.80B1.62B
Gross Profit
1.55B1.33B1.28B709.40M1.38B1.20B
EBIT
811.10M325.10M440.10M686.10M1.23B540.50M
EBITDA
246.10M352.90M373.90M711.70M1.26B564.30M
Net Income Common Stockholders
289.90M247.90M286.10M535.80M958.30M421.00M
Balance SheetCash, Cash Equivalents and Short-Term Investments
528.80M951.40M13.20M7.70M23.30M16.00M
Total Assets
9.26B8.85B7.61B6.90B7.05B7.49B
Total Debt
0.006.35B5.07B4.59B4.62B4.61B
Net Debt
6.18B-845.00M5.05B4.58B4.59B4.59B
Total Liabilities
7.55B7.11B5.86B5.28B5.23B5.19B
Stockholders Equity
1.71B1.75B1.75B1.62B1.82B2.30B
Cash FlowFree Cash Flow
1.17B1.14B1.20B1.24B1.06B976.70M
Operating Cash Flow
1.17B1.14B1.20B1.24B1.07B985.20M
Investing Cash Flow
-1.43B-1.72B-1.42B-460.60M437.30M-673.50M
Financing Cash Flow
807.70M957.30M266.20M-794.60M-1.47B-433.20M

Credit Acceptance Technical Analysis

Technical Analysis Sentiment
Neutral
Last Price487.05
Price Trends
50DMA
489.71
Negative
100DMA
492.73
Negative
200DMA
476.56
Positive
Market Momentum
MACD
-1.52
Positive
RSI
49.69
Neutral
STOCH
59.59
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CACC, the sentiment is Neutral. The current price of 487.05 is below the 20-day moving average (MA) of 490.13, below the 50-day MA of 489.71, and above the 200-day MA of 476.56, indicating a neutral trend. The MACD of -1.52 indicates Positive momentum. The RSI at 49.69 is Neutral, neither overbought nor oversold. The STOCH value of 59.59 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
70
Outperform
$5.49B20.8517.24%13.77%20.95%
JXJXN
69
Neutral
$5.90B80.541.24%3.43%3.55%8.91%
OMOMF
68
Neutral
$6.13B10.9117.46%7.93%9.07%
LNLNC
66
Neutral
$5.67B4.7216.91%5.42%8.31%-2.30%
SLSLM
66
Neutral
$6.79B11.6627.60%1.47%-0.70%-12.72%
64
Neutral
$12.79B9.717.54%16971.00%12.07%-7.53%
63
Neutral
$6.65B103.13-71.28%1.63%118.79%-285.61%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
CACC
Credit Acceptance
487.05
1.74
0.36%
LNC
Lincoln National
32.68
2.11
6.90%
SLM
SLM
32.18
11.71
57.21%
OMF
OneMain Holdings
51.71
7.16
16.07%
STEP
StepStone Group
56.56
15.05
36.26%
JXN
Jackson Financial Incorporation
82.61
11.95
16.91%

Credit Acceptance Corporate Events

Private Placements and FinancingBusiness Operations and Strategy
Credit Acceptance Highlights Commitment to Accessible Vehicle Financing
Positive
Apr 2, 2025

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.

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.