Over the last six months, Credit Acceptance’s shares have sunk to $473.35, producing a disappointing 5.7% loss - a stark contrast to the S&P 500’s 10.6% gain. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Credit Acceptance, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Do We Think Credit Acceptance Will Underperform?
Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons you should be careful with CACC and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
Unfortunately, Credit Acceptance’s 2.9% annualized revenue growth over the last five years was sluggish. This was below our standards.
2. EPS Growth Has Stalled
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Credit Acceptance’s flat EPS over the last five years was below its 2.9% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.
If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.
Credit Acceptance currently has $6.37 billion of debt and $1.58 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 3.9×. We think this is dangerous - for a financials business, anything above 3.5× raises red flags.
Final Judgment
Credit Acceptance falls short of our quality standards. After the recent drawdown, the stock trades at 11.7× forward P/E (or $473.35 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. Let us point you toward one of our top digital advertising picks.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.