Credit Acceptance's (NASDAQ:CACC) investors will be pleased with their strong 228% return over the last five years
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. Long term Credit Acceptance Corporation (NASDAQ:CACC) shareholders would be well aware of this, since the stock is up 228% in five years. Also pleasing for shareholders was the 18% gain in the last three months.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
View our latest analysis for Credit Acceptance
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Credit Acceptance managed to grow its earnings per share at 31% a year. So the EPS growth rate is rather close to the annualized share price gain of 27% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Credit Acceptance's earnings, revenue and cash flow.
A Different Perspective
It's nice to see that Credit Acceptance shareholders have received a total shareholder return of 99% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 27% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Credit Acceptance better, we need to consider many other factors. For example, we've discovered 3 warning signs for Credit Acceptance (1 is potentially serious!) that you should be aware of before investing here.
Of course Credit Acceptance may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
