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Credit Acceptance Exhibits Top-Line Strength: Should You Buy?

Zacks Equity Research

We issued an updated research report on Credit Acceptance Corporation’s CACC on Apr 4. The company’s top-line growth is expected to be supported by increasing consumer loans and higher interest rates. Moreover, its steady capital-deployment activities reflect strong liquidity.

Rising demand for consumer loans and favorable interest rates have supported Credit Acceptance’s revenues to a great extent. Additionally, the company’s revenues are expected to increase further, given higher demand for auto loans and rise in finance charges. Also, a considerable rise in dealer enrollments and active dealers will support the company’s top line.

We also remain encouraged by the company’s steady capital-deployment measures. It returns capital through share repurchases rather than paying dividends. Although Credit Acceptance has a considerably higher debt burden compared to peers, the company’s high cash-flow generating business model and lower requirements of capital expenditures will help sustain its share buybacks.

However, continuously rising expenses, mainly due to higher salaries and wages, along with sales and marketing expenses remain a concern for the company. Furthermore, deterioration in the company’s overall credit quality might hamper its financials in the future.

Nevertheless, the Zacks Consensus Estimate for 2019 earnings has been revised slightly upward, over the past 30 days. This reflects analysts’ bullish sentiments regarding the company’s earnings growth prospects. Thus, the stock currently carries a Zacks Rank #2 (Buy).

Moreover, over the past six months, shares of Credit Acceptance have gained 7.9% against its industry’s decline of 5.8%.

Other Key Picks

Ezcorp, Inc’s EZPW shares have rallied 24%, over the past three months. In addition, the company’s ongoing year’s earnings estimates moved up 5.5%, over the past 60 days. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Discover Financial Services’ DFS shares have appreciated 21.6%, in three months’ time. Moreover, the company’s earnings estimates for 2019 have been revised 1.2% upward, over the past 60 days. At present, the stock carries a Zacks Rank of 2.

OneMain Holdings, Inc’s OMF shares have gained 27.5% in the past three months. Also, the company’s current-year earnings estimates moved 2.2% upward, in 60 days’ time. Currently, it carries a Zacks Rank of 2.

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Credit Acceptance Corporation (CACC) : Free Stock Analysis Report
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EZCORP, Inc. (EZPW) : Free Stock Analysis Report
OneMain Holdings, Inc. (OMF) : Free Stock Analysis Report
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