Those who invested in Credit Acceptance (NASDAQ:CACC) three years ago are up 51%
By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Credit Acceptance Corporation (NASDAQ:CACC), which is up 51%, over three years, soundly beating the market return of 16% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 39% in the last year.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Credit Acceptance
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
During the three years of share price growth, Credit Acceptance actually saw its earnings per share (EPS) drop 0.5% per year.
Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Credit Acceptance at the moment. So other metrics may hold the key to understanding what is influencing investors.
The revenue drop of 13% is as underwhelming as some politicians. The only thing that's clear is there is low correlation between Credit Acceptance's share price and its historic fundamental data. Further research may be required!
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think Credit Acceptance will earn in the future (free profit forecasts).
A Different Perspective
It's nice to see that Credit Acceptance shareholders have received a total shareholder return of 39% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 5% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Credit Acceptance , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
