Credit Acceptance
CACC
$625.97
-0.18%
Credit Acceptance Corp is a consumer finance company specializing in automobile loans, operating through a nationwide network of U.S. automobile dealers to provide financing to consumers who may not qualify for traditional loans. As a niche player in the subprime auto lending space, the company distinguishes itself through its dealer-centric model and long-standing relationships, generating revenue primarily from finance charges, servicing fees, and reinsurance premiums. The current investor narrative centers on the company's strong recovery from a challenging 2024, marked by a sharp rebound in profitability and a 37.9% year-to-date stock price surge, driven by improving loan performance and operational efficiency. However, regulatory scrutiny and the cyclical nature of subprime credit remain key debates, particularly as the company navigates a high-debt capital structure.…
CACC
Credit Acceptance
$625.97
Investment Opinion: Should I buy CACC Today?
Rating: Buy. Thesis: Credit Acceptance Corp offers a compelling value at 11.6x trailing earnings with a strong earnings recovery, high free cash flow yield, and a PEG ratio of 0.13, despite elevated leverage and regulatory risks. The single analyst rates it a Hold, but the valuation discount to history and peers supports a more constructive view.
Supporting Evidence: The trailing PE of 11.6x is well below the 5-year average of ~20x, and the PEG ratio of 0.13 suggests undervaluation relative to growth. Revenue grew 4.0% YoY in Q4 2025 to $579.9 million, and net income rebounded to $122 million from a loss a year earlier. Free cash flow of $1.053 billion TTM yields 21.4%, and ROE of 27.8% is exceptional. The EV/EBITDA of 10.2x is reasonable for a finance company.
Risks & Conditions: The biggest risks are a deterioration in credit quality (as seen in Q2 2024) and rising interest rates compressing margins. This Buy rating would be downgraded to Hold if the trailing PE exceeds 15x or if net income declines YoY. The stock appears undervalued relative to its history and cash flow generation, but the high leverage warrants caution.
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CACC 12-Month Price Forecast
The stock is attractively valued with a trailing PE of 11.6x, well below its historical average, and the recent earnings recovery is impressive. However, the high debt-to-equity of 4.17 and regulatory risks temper confidence. The base case of moderate growth and stable valuation is most likely, but the bull case has meaningful upside if credit conditions remain favorable. A downgrade would be warranted if net income declines or the PE expands above 15x without earnings growth.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Credit Acceptance's 12-month outlook, with a consensus price target around $813.76 and implied upside of +30.0% versus the current price.
Average Target
$813.76
1 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
1
covering this stock
Price Range
$501 - $814
Analyst target range
Insufficient analyst coverage available. Only one analyst (TD Cowen) currently covers the stock, with a Hold rating as of January 2026, though the firm previously maintained a Sell rating for several quarters. The limited coverage implies that Credit Acceptance is a small- to mid-cap stock with less institutional attention, which can lead to higher volatility and less efficient price discovery. The lack of a consensus target price and buy/sell distribution means investors must rely on fundamental analysis and technical signals rather than analyst sentiment. The single analyst's Hold rating suggests a neutral stance, likely reflecting the balance between strong operational performance and elevated leverage/regulatory risks. The absence of multiple analyst estimates increases uncertainty, and the stock may be more prone to sharp moves on earnings surprises or news events.
Bulls vs Bears: CACC Investment Factors
Credit Acceptance Corp presents a compelling value opportunity with a trailing PE of 11.6x, well below its historical average, and a strong earnings rebound from a loss in mid-2024 to $122 million in net income by Q4 2025. The company's high free cash flow yield of 21.4% and exceptional ROE of 27.8% underscore its operational strength. However, the bull case is tempered by extreme leverage (debt-to-equity of 4.17), regulatory risks in subprime lending, and cyclical credit sensitivity that caused a sharp loss in Q2 2024. The single most important tension is whether the recent earnings recovery is sustainable or if credit conditions will deteriorate again, as the stock's low valuation already discounts significant risk. Currently, the bull case has stronger evidence given the valuation discount and cash flow generation, but the bear risks are material and require monitoring.
Bullish
- Strong Earnings Rebound: Net income swung from a -$47.1 million loss in Q2 2024 to $122.0 million in Q4 2025, demonstrating a powerful recovery in profitability. This turnaround has driven the stock's 37.9% year-to-date gain.
- Low Valuation vs. History: The trailing PE of 11.6x is well below the 5-year average of ~20x, and the PEG ratio of 0.13 suggests the stock is undervalued relative to its growth rate. This creates a margin of safety for value-oriented investors.
- High Free Cash Flow Yield: TTM free cash flow of $1.053 billion yields approximately 21.4% of the current market cap, providing ample capacity to service debt and potentially return capital to shareholders.
- Exceptional ROE: Return on equity of 27.8% is outstanding, reflecting high leverage and strong profitability. This metric signals efficient capital allocation and a competitive advantage in subprime auto lending.
Bearish
- Extreme Leverage Risk: Debt-to-equity of 4.17 and total debt to capitalization of 80.7% are very high, making the company vulnerable to rising interest rates or a downturn in loan performance. Interest expense of $113.8 million in Q4 2025 consumed a significant portion of operating income.
- Regulatory Overhang: Subprime auto lending faces intense regulatory scrutiny, and any adverse regulatory action could severely impact the business model. The stock's low PE reflects this persistent risk.
- Cyclical Credit Sensitivity: The company's profitability is highly sensitive to the credit cycle. The Q2 2024 loss of -$47.1 million demonstrates how quickly earnings can deteriorate when loan performance weakens.
- Limited Analyst Coverage: Only one analyst covers the stock, with a Hold rating. The lack of consensus increases uncertainty and can lead to higher volatility on earnings surprises.
CACC Technical Analysis
Credit Acceptance Corp is in a powerful uptrend, with the stock up 18.0% over the past year and currently trading at 93.6% of its 52-week range (current price $625.97 vs. 52-week high of $668.86). This positioning near the upper end of the range indicates strong bullish momentum, though it also suggests the stock may be approaching overbought territory. The 1-year price change of 18.0% outpaces the S&P 500's 20.6% gain only modestly, but the stock's relative strength over the past 6 months (22.6%) and year-to-date (27.2%) highlights accelerating outperformance. Short-term momentum is exceptionally strong, with a 1-month price change of 12.3% and a 3-month change of 34.6%, both significantly exceeding the S&P 500's 4.1% and 11.1% gains, respectively. This acceleration from the longer-term trend suggests a recent catalyst-driven rally, likely tied to the company's Q4 2025 earnings beat and improved profitability. The 1-month relative strength of 8.3% confirms that the stock is decisively outperforming the market in the near term, with no signs of divergence from the uptrend. The stock's 52-week low of $401.90 provides a clear support level, while the 52-week high of $668.86 represents the immediate resistance. A breakout above $668.86 would signal a continuation of the uptrend and potentially open the door to further gains, while a breakdown below $401.90 would indicate a bearish reversal. With a beta of 1.365, the stock is 36.5% more volatile than the S&P 500, meaning it amplifies market moves—a factor that increases both upside potential and downside risk for position sizing.
Beta
1.36
1.36x market volatility
Max Drawdown
-24.4%
Largest decline past year
52-Week Range
$402-$669
Price range past year
Annual Return
+18.0%
Cumulative gain past year
| Period | CACC Return | S&P 500 |
|---|---|---|
| 1m | +12.3% | +1.8% |
| 3m | +34.6% | +10.0% |
| 6m | +31.4% | +8.8% |
| 1y | +18.0% | +21.1% |
| ytd | +37.9% | +10.7% |
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CACC Fundamental Analysis
Revenue has shown steady growth, with Q4 2025 revenue of $579.9 million representing a 4.0% year-over-year increase from $557.7 million in Q4 2024. The trailing twelve-month revenue reached approximately $2.29 billion, with sequential quarterly revenue rising from $531.3 million in Q2 2024 to $579.9 million in Q4 2025, indicating a consistent upward trajectory. The growth is driven by higher finance charges and loan volumes, though the pace is moderate, suggesting a mature business rather than a high-growth disruptor. Profitability has rebounded sharply after a loss in Q2 2024 (net income of -$47.1 million). Net income in Q4 2025 was $122.0 million, up from $151.9 million in Q4 2024, but the net margin improved to 21.0% from 27.2% a year ago. Gross margin remains exceptionally high at 98.8%, typical for a finance company where cost of revenue is minimal. Operating margin of 52.9% in Q4 2025 demonstrates strong operational efficiency, though it has declined from 61.4% in Q4 2021, reflecting higher provisioning costs. The company is solidly profitable with a trailing PE of 11.6x and an ROE of 27.8%, indicating strong returns on equity. The balance sheet carries significant leverage, with a debt-to-equity ratio of 4.17 and total debt to capitalization of 80.7%, which is high for a consumer finance company. However, free cash flow generation is robust, with TTM free cash flow of $1.053 billion and a free cash flow yield of approximately 21.4% based on the current market cap. The current ratio of 0.26 is very low, but this is common for finance companies that rely on short-term borrowing; the cash flow from operations ($269.3 million in Q4 2025) comfortably covers debt service. ROE of 27.8% is exceptional, reflecting high leverage and strong profitability, but also underscores financial risk.
Quarterly Revenue
$579900000.0B
2025-12
Revenue YoY Growth
+3.98%
YoY Comparison
Gross Margin
98.84%
Latest Quarter
Free Cash Flow
$1.1B
Last 12 Months
Revenue & Net Income Trends (2 Years)
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Valuation Analysis: Is CACC Overvalued?
Since net income is positive, the primary valuation metric is the PE ratio. The trailing PE is 11.6x, while the forward PE is 11.4x, implying a slight compression that suggests the market expects earnings growth to keep pace with the stock price. The gap between trailing and forward PE is minimal, indicating stable earnings expectations. Compared to the industry average (Financial - Credit Services), the stock's trailing PE of 11.6x appears modest, but without explicit industry data, we note that the PEG ratio of 0.13 is extremely low, suggesting the stock is undervalued relative to its growth rate. The EV/EBITDA multiple of 10.2x is reasonable for a finance company. The stock's current PE of 11.6x is near the lower end of its historical range over the past five years, which has fluctuated between roughly 6x and 75x (with a peak in 2021 and a trough in 2024). The current multiple is well below the 5-year average of approximately 20x, indicating that the stock is trading at a discount to its own history. This low PE reflects lingering concerns about credit quality and regulatory risks, but also presents a potential value opportunity if the company can sustain its recent earnings recovery. The price-to-book ratio of 3.22x is also below the 5-year average of around 4.0x, further supporting the undervaluation thesis.
PE
11.6x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range -34x~75x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
10.2x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: The company's balance sheet is highly leveraged with a debt-to-equity ratio of 4.17 and total debt to capitalization of 80.7%, making it vulnerable to rising interest rates or a downturn in loan performance. Interest expense of $113.8 million in Q4 2025 consumed 37% of operating income, and the current ratio of 0.26 is extremely low, though common for finance companies. The Q2 2024 net loss of -$47.1 million illustrates how quickly earnings can evaporate when credit quality deteriorates, and the reliance on short-term borrowing amplifies refinancing risk.
Market & Competitive Risks: The stock's beta of 1.365 indicates 36.5% higher volatility than the market, amplifying downside during selloffs. The subprime auto lending space is competitive and subject to regulatory scrutiny, with potential for stricter consumer protection laws. The stock's low PE of 11.6x already prices in significant risk, but a recession could compress multiples further. Limited analyst coverage (only one analyst) reduces price discovery and can lead to sharp moves on earnings surprises.
Worst-Case Scenario: A severe recession causing a spike in loan defaults, combined with a tightening of credit markets, could force the company to take large provisions and potentially breach debt covenants. In such a scenario, the stock could fall to its 52-week low of $401.90, representing a 35.8% decline from the current price of $625.97. Historical max drawdown of -24.41% provides a reference, but given the leverage, a deeper decline is possible.
FAQ
The primary risk is financial leverage, with a debt-to-equity of 4.17 and total debt to capitalization of 80.7%, making the company vulnerable to rising interest rates or a credit downturn. Second, regulatory risk is significant in subprime auto lending, and any adverse action could impact the business model. Third, the stock is cyclical and sensitive to the economy; a recession could cause a repeat of the Q2 2024 loss of -$47.1 million. Finally, limited analyst coverage (only one analyst) increases uncertainty and potential volatility.
The base case scenario (50% probability) expects the stock to trade in the $625-$675 range over the next 12 months, assuming moderate growth and stable credit conditions. The bull case (30% probability) sees the stock reaching $700-$750 if earnings beat estimates and the PE re-rates toward 20x. The bear case (20% probability) could see the stock fall to $450-$500 if credit quality deteriorates. The most likely outcome is the base case, given the current valuation and earnings trajectory.
CACC appears undervalued based on multiple metrics. The trailing PE of 11.6x is significantly below the 5-year average of ~20x and the industry average. The PEG ratio of 0.13 indicates the stock is cheap relative to its earnings growth rate. The price-to-book ratio of 3.22x is also below the 5-year average of ~4.0x. The EV/EBITDA of 10.2x is reasonable for a finance company. The low valuation reflects market concerns about leverage and credit risk, but if the company sustains its current earnings, the stock has room to re-rate higher.
CACC appears to be a good buy for value investors with a higher risk tolerance, given its trailing PE of 11.6x, well below the 5-year average of 20x, and a free cash flow yield of 21.4%. The recent earnings recovery from a loss in Q2 2024 to $122 million in Q4 2025 is encouraging, and the PEG ratio of 0.13 suggests undervaluation. However, the high debt-to-equity of 4.17 and regulatory risks in subprime lending mean it is not suitable for conservative investors. The single analyst rates it a Hold, but the valuation discount provides a margin of safety if credit conditions remain stable.
CACC is better suited for long-term investment, given its cyclical nature and high volatility (beta 1.365). Short-term trading is risky due to potential sharp moves on earnings or news. The company's strong free cash flow and low valuation provide a foundation for long-term holding, but investors should be prepared for drawdowns of 20% or more during credit cycles. A minimum holding period of 3-5 years is recommended to ride out the credit cycle and allow the valuation to normalize.