The current global economic crisis, resulting from the coronavirus outbreak, has made people wary of investing in finance stocks. Nevertheless, strong fundamentals of Credit Acceptance Corporation CACC suggest that it is a wise idea to add the stock to your portfolio now.
The Zacks Consensus Estimate for the company’s current-year earnings has been unchanged over the past seven days. The stock currently carries a Zacks Rank #2 (Buy).
Looking at its price performance, shares of the company have lost 46.5% so far this year compared with a 53.5% decline recorded by the industry. However, strength in fundamentals and a favorable Zacks Rank suggest that the price performance will improve in the future.
Here are a few aspects that make Credit Acceptance an attractive investment option now.
Revenue Strength: The company’s revenues witnessed a six-year (2014-2019) CAGR of 15.5%, driven mainly by continued rise in finance charges. Moreover, given a decent rise in dealer enrollments and active dealers, its top line is expected to improve further.
Notably, the company’s revenues are projected to decline 2.9% in 2020 mainly because of the current tough economic environment. However, its projected sales growth rate of 11.1% for 2021 indicates upward momentum in revenues.
Earnings per Share (EPS) Growth: Credit Acceptance recorded EPS growth of 23.6% over the past three-five years (higher than the industry average of 12.4%). While its earnings are projected to decline 42% in 2020, the same is expected to improve 29.3% in 2021 on a year-over-year basis.
Also, the company’s long-term (three to five years) estimated EPS growth rate of 11% promises rewards for investors.
Superior Return on Equity (ROE): Credit Acceptance’s ROE is 29.25%, significantly higher than the industry’s average of 16.68%. This indicates that the company reinvests its cash more efficiently compared with the industry.
Favorable Growth Score: The stock has a Growth Score of B. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
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Virtu Financial, Inc.’s VIRT Zacks Consensus Estimate for current-year earnings has been revised upward by 63.8% over the past 60 days. The company currently sports a Zacks Rank #1.
The consensus estimate for earnings of Focus Financial Partners Inc. FOCS has been revised 1.4% upward for the current year over the past 60 days. The company presently carries a Zacks Rank #2.
Northrim BanCorp Inc. NRIM has witnessed upward earnings estimate revision of 1.4% for 2020 over the past 60 days. The company currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Credit Acceptance Corporation (CACC) : Free Stock Analysis Report
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