Credit Acceptance
CACC
$562.34
-0.34%
Credit Acceptance Corp is a consumer finance company specializing in indirect subprime auto lending, funding vehicle purchases through a nationwide network of independent and franchised dealerships that serve consumers unable to obtain traditional bank financing. Its revenue is derived primarily from finance charges on its loan portfolio, supplemented by premiums earned on reinsurance of vehicle service contracts and other dealer-related fees, making it a specialist niche lender rather than a diversified consumer bank. The company's competitive identity rests on its dealer-partner model and its controversial but highly profitable portfolio forecasting methodology, which has historically produced industry-leading returns on equity despite elevated credit risk. The current investor narrative is dominated by a sharp divergence between deteriorating consumer credit conditions and the company's improving reported earnings: subprime auto delinquencies recently hit a 32-year high, yet CACC's net income has risen sequentially for four consecutive quarters, with Q1 2026 EPS of $12.64 versus $8.66 a year earlier. This tension — credit-cycle risk versus near-term earnings momentum and aggressive share buybacks — is the central debate driving analyst caution and stock volatility.…
CACC
Credit Acceptance
$562.34
Investment Opinion: Should I buy CACC Today?
The synthesized recommendation is Hold, with a mild bullish bias for investors who can tolerate above-average volatility. The core thesis is that CACC is a deeply profitable, cash-generative subprime lender trading at a low-teens PE and near multi-year low price-to-book, but the 32-year-high subprime delinquency cycle creates a binary risk that prevents a full Buy endorsement. The analyst consensus rating of Hold (mean 3.0) and average target price of $636.67, implying 10.1% upside, align with this cautious stance.
Supporting evidence for the Hold rating includes: (1) valuation is undemanding at 11.6x trailing PE and 10.6x forward PE, with a PEG of 0.129; (2) revenue growth is modest at 3.15% year-over-year, but net income has surged 55% over four quarters to $135.8M; (3) profitability is exceptional with a 23.4% net margin, 27.8% ROE, and $1.05 billion in trailing free cash flow; and (4) the company is aggressively returning capital, repurchasing $178.9 million of stock in Q1 2026 alone. Relative to the broader Financial Services sector, CACC's 11.6x PE screens as a discount, and its 3.22x price-to-book is near the low end of its historical 3.0x–5.6x range.
The biggest risks that could invalidate the thesis are: (1) a continued rise in subprime auto delinquencies forcing larger loan-loss provisions and erasing earnings growth; (2) the company's high leverage (debt-to-equity of 4.17x) and weak current ratio (0.264) creating refinancing risk if credit markets tighten; and (3) the stock's high beta (1.349) and 8.77 short ratio amplifying downside moves. The rating would upgrade to Buy if subprime delinquency trends stabilize and the company sustains net income above $130 million per quarter, or if the stock pulls back toward the $500 level while fundamentals remain intact. It would downgrade to Sell if quarterly net income falls below $100 million or if credit-loss provisions rise sharply. Overall, the stock appears fairly valued to slightly undervalued relative to its history, but the credit-cycle overhang justifies a Hold rating.
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CACC 12-Month Price Forecast
CACC presents a classic value-versus-credit-risk dilemma. The company is highly profitable with a 27.8% ROE and $1.05 billion in trailing free cash flow, and it trades at a low-teens PE with a PEG of 0.129, suggesting deep value if credit conditions stabilize. However, the 32-year-high subprime delinquency rate is a material threat that could force significant provisioning and reverse recent earnings gains. The analyst consensus of Hold and the tight target range ($600–$660) reflect this uncertainty. I would upgrade to bullish if delinquency trends show sustained improvement for two quarters, and downgrade to bearish if quarterly net income falls below $100 million or if credit-loss provisions rise sharply. Given the balanced risk/reward, a neutral stance with medium confidence is appropriate.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Credit Acceptance's 12-month outlook, with a consensus price target around $636.67 and implied upside of +13.2% versus the current price.
Average Target
$636.67
0 analysts
Implied Upside
+13.2%
vs. current price
Analyst Count
—
covering this stock
Price Range
$600 - $660
Analyst target range
Coverage of CACC is thin, with only 3 analysts contributing to the consensus, and sentiment is decidedly neutral: the recommendation is "hold" with a recommendation mean of 3.0 (where 1 is strong buy and 5 is strong sell). The average price target of $636.67 implies approximately 10.1% upside from the current price of $578.29, with the low target of $600.00 representing 3.8% upside and the high target of $660.00 representing 14.1% upside. The consensus therefore leans mildly constructive on price but cautious on conviction — analysts see modest appreciation potential but are unwilling to endorse a buy given the credit-cycle overhang. The target range is relatively tight at $60 (roughly 9.4% of the average target), which signals stronger conviction about the company's fair value than the "hold" rating might suggest, though the small sample size limits statistical significance. The high target of $660.00 implies a scenario of continued earnings beats, stable credit performance, and multiple expansion back toward the mid-teens PE range, while the low target of $600.00 prices in flat-to-modest earnings growth with no re-rating. Institutional ratings history shows a notable pattern: TD Cowen has maintained a Sell rating through multiple updates from August 2024 through October 2025 before shifting to Hold in January 2026 and reaffirming Hold in May and July 2026, while Stephens & Co. has held Equal Weight since January 2025. This migration from Sell to Hold at the primary bearish shop is a meaningful sentiment improvement, though no firm has moved to a Buy, and the absence of upgrades suggests analysts are waiting for evidence that the delinquency cycle has peaked before turning constructive.
Bulls vs Bears: CACC Investment Factors
The bull case rests on powerful earnings momentum, deep value multiples, and exceptional cash generation, while the bear case centers on a 32-year-high subprime delinquency cycle, stagnant revenue, and high leverage. Currently, the bull evidence appears stronger on reported fundamentals: net income has grown 55% over four quarters, ROE is 27.8%, and the stock trades at just 11.6x trailing earnings with a PEG of 0.129. However, the single most important tension is whether CACC's improving credit-loss forecasts can withstand the broader subprime deterioration—if delinquencies continue to rise, provisioning could reverse sharply and erase the earnings gains that justify the current valuation. Conversely, if the credit cycle stabilizes, the stock's low-teens PE and 10.1% analyst upside could expand materially as the market re-rates a proven subprime lender.
Bullish
- Earnings momentum accelerating sharply: Net income has risen for four consecutive quarters, from $87.4M in Q2 2025 to $135.8M in Q1 2026, a 55% sequential increase. Q1 2026 EPS of $12.64 is 46% above the $8.66 reported a year earlier, demonstrating powerful operating leverage despite flat revenue.
- Deep value on multiple metrics: The stock trades at 11.6x trailing PE and 10.6x forward PE, with a PEG ratio of just 0.129. Price-to-book of 3.22x sits near the bottom of its historical 3.0x–5.6x range, suggesting the market is pricing in significant credit deterioration that has not yet materialized in reported results.
- Exceptional profitability and cash generation: Q1 2026 net margin reached 23.4%, up from 15.2% in Q2 2025, while ROE stands at 27.8% and trailing free cash flow is $1.05 billion. The company repurchased $178.9 million of stock in Q1 2026 alone, funded entirely from internal cash flow.
- Analyst targets imply upside: The consensus average price target of $636.67 represents 10.1% upside from the current $578.29, with the high target of $660.00 implying 14.1% upside. TD Cowen's migration from Sell to Hold in January 2026 signals improving sentiment among previously bearish analysts.
Bearish
- Subprime delinquencies at 32-year high: Recent news highlights that subprime auto loan delinquencies have reached their worst level in 32 years, directly threatening CACC's core borrower base. As a specialist in indirect subprime auto lending, the company is highly exposed to any further deterioration in consumer credit.
- Revenue growth is stagnant: Q1 2026 revenue of $580.0M grew just 3.15% year-over-year, and the quarterly trend has been essentially flat: $575.6M, $576.4M, $579.9M, and $580.0M over the past four quarters. Without top-line acceleration, earnings growth relies entirely on credit-loss assumptions and provisioning releases that may not be sustainable.
- High leverage and weak current ratio: Debt-to-equity of 4.17x and a debt ratio of 73.7% reflect the leveraged nature of the lending model. The current ratio of just 0.264 indicates that short-term liabilities far exceed short-term assets, creating refinancing risk if credit markets tighten or funding costs rise.
- Analyst consensus is only Hold: With a recommendation mean of 3.0 (Hold) and only 3 analysts covering the stock, there is no strong buy endorsement. The average target of $636.67 implies just 10.1% upside, and the low target of $600.00 offers only 3.8% upside, suggesting limited conviction in a near-term re-rating.
CACC Technical Analysis
CACC is in a broad recovery uptrend that has stalled in recent weeks. Over the past year the stock has gained 14.68%, and at $578.29 it trades at approximately 66% of its 52-week range (low of $401.90, high of $668.86), meaning it sits in the upper-middle portion of its annual band but remains roughly 13.5% below its high. The 6-month gain of 34.12% and YTD advance of 27.40% confirm that the dominant trend since spring has been upward, though the failure to reclaim the $668.86 high suggests momentum is maturing rather than accelerating. Short-term momentum has clearly decelerated: the stock is down 0.82% over the past month and 0.25% over three months, a stark contrast to the 34.12% six-month gain, indicating a consolidation phase after the spring rally. Notably, the 3-month relative strength versus SPY is -2.25 percentage points, meaning CACC has underperformed a market that rose 2.00% over the same window, while the 1-month relative strength of +0.14 points is essentially flat. The most recent session saw a 2.05% decline to $578.29 on volume of 279,914 shares, and the 8.77 short ratio (days-to-cover) signals that bearish positioning remains meaningful — a setup that could fuel a squeeze on any positive catalyst but also reflects genuine skepticism. Key technical levels are the $668.86 52-week high as resistance and the $401.90 52-week low as the ultimate support floor, with the $550–$560 zone (the July–August consolidation base) acting as nearer-term support. A decisive break above $668.86 would confirm trend continuation and likely target new highs, while a breakdown below $550 would threaten the recovery structure and open the door toward the $500 area. With a beta of 1.349, CACC is roughly 35% more volatile than the S&P 500, and its 21.71% maximum drawdown over the period underscores that position sizing and stop discipline are essential for holders.
Beta
1.35
1.35x market volatility
Max Drawdown
-21.7%
Largest decline past year
52-Week Range
$402-$669
Price range past year
Annual Return
+13.3%
Cumulative gain past year
| Period | CACC Return | S&P 500 |
|---|---|---|
| 1m | -6.4% | +1.0% |
| 3m | -6.6% | +5.5% |
| 6m | +27.0% | +19.9% |
| 1y | +13.3% | +16.0% |
| ytd | +23.9% | +13.4% |
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CACC Fundamental Analysis
Revenue growth is steady but modest, with Q1 2026 revenue of $580.0 million representing 3.15% year-over-year growth versus Q1 2025's $562.3 million. The multi-quarter trend shows a consistent, low-single-digit cadence — $575.6M in Q2 2025, $576.4M in Q3 2025, $579.9M in Q4 2025, and $580.0M in Q1 2026 — indicating a mature, plateauing top line rather than an accelerating one. The real earnings leverage is coming from below the revenue line: net income has climbed from $87.4 million in Q2 2025 to $108.2M, $122.0M, and $135.8M in the subsequent three quarters, a 55% sequential increase over that span. This profit acceleration despite flat revenue implies improving credit-loss forecasting, lower provisioning, or favorable portfolio yield dynamics — but it also raises the question of sustainability if the 32-year-high subprime delinquency backdrop begins to bite. Profitability is robust: Q1 2026 net income of $135.8 million produced a 23.4% net margin, while gross margin stands at 98.75% and operating margin at 47.6%, reflecting the asset-light, fee-driven economics of a finance receivables book. The net margin trajectory has been volatile but improving — from 15.2% in Q2 2025 to 18.8%, 21.0%, and 23.4% in the following quarters — and the Q1 2026 EBITDA of $289.9 million (49.98% EBITDA margin) is nearly double the $149.7 million reported in Q3 2025, though that comparison is distorted by a change in interest expense presentation. The balance sheet carries meaningful leverage typical of a lender: debt-to-equity of 4.17x and a debt ratio of 73.7%, with a current ratio of just 0.264 reflecting the short-term funding structure of the loan book. However, cash generation is strong — trailing free cash flow of $1.05 billion and Q1 2026 FCF of $345.5 million against operating cash flow of $346.8 million — and ROE of 27.8% is exceptional for a financial company. The company returned capital aggressively, repurchasing $178.9 million of stock in Q1 2026 alone, funded entirely from internal cash flow, which underscores that growth is self-financing despite the high leverage.
Quarterly Revenue
$580000000.0B
2026-03
Revenue YoY Growth
+3.1%
YoY Comparison
Gross Margin
98.9%
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?
Because CACC is solidly profitable — Q1 2026 net income of $135.8 million and trailing EPS of $12.64 — the PE ratio is the appropriate primary metric. The stock trades at a trailing PE of 11.59x and a forward PE of 10.55x, a modest 9% compression that implies the market expects only slight earnings growth ahead, a conservative stance given that consensus estimated EPS averages $72.07 for the forward period. The PEG ratio of just 0.129 is strikingly low, suggesting the shares are cheap relative to expected growth, though this metric can be distorted by the volatility of CACC's earnings base. Relative to the broader Financial Services sector, CACC's 11.6x trailing PE screens as a discount to the market multiple, but the more instructive comparison is its own history: the stock's PE has ranged from roughly 6.6x (Q2 2021) to 74.7x (Q2 2023, distorted by a near-zero earnings quarter), and the current 11.6x sits in the lower quartile of that band. On price-to-book, CACC trades at 3.22x versus a historical range of roughly 3.0x to 5.6x, placing it near the bottom of its own valuation band — a level that historically has coincided with periods of credit pessimism rather than fundamental deterioration. The PS ratio of 2.12x is dramatically below the 7.8x–21.9x range seen from 2021 through early 2026, though this reflects the reclassification of interest income into revenue rather than a true valuation collapse. The key takeaway is that CACC is priced for credit stress — a low-teens PE, a PEG below 0.2, and P/B near multi-year lows — meaning the market is already discounting meaningful deterioration in subprime auto credit, leaving asymmetric upside if loss rates stabilize.
PE
11.6x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 7x~26x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
10.2x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are significant given CACC's leveraged lending model. Debt-to-equity of 4.17x and a debt ratio of 73.7% mean that a modest increase in funding costs or a decline in portfolio yield could compress net interest margins, which are already reflected in the 23.4% net margin. The current ratio of 0.264 highlights a structural reliance on short-term funding to support a long-duration loan book, creating refinancing risk if credit markets seize. Additionally, revenue growth of just 3.15% year-over-year means that any acceleration in credit losses would directly hit the bottom line, as there is little top-line buffer to absorb higher provisions. The company's earnings are also concentrated in a single product—subprime auto loans—leaving it vulnerable to sector-specific shocks.
Market and competitive risks are elevated by CACC's premium valuation relative to its own history and its high beta. While the stock trades at a low absolute PE of 11.6x, its price-to-book of 3.22x is near the bottom of its historical range, implying that the market has already priced in credit stress; however, if delinquencies continue to rise, the stock could de-rate further toward the 6.6x PE seen in 2021. Beta of 1.349 means CACC is 35% more volatile than the S&P 500, so a broad market selloff would likely hit the stock disproportionately. Competitive pressures from banks like Capital One, which are better capitalized and have more diversified loan books, could also erode CACC's market share in the subprime auto segment, especially if regulators tighten lending standards.
The worst-case scenario involves a sharp deterioration in subprime auto credit that forces CACC to significantly increase loan-loss provisions, reversing its recent earnings gains. If delinquencies continue to climb and the company's forecasting methodology proves too optimistic, net income could fall back toward the $87.4M quarterly level seen in Q2 2025 or lower, pressuring the stock toward its 52-week low of $401.90. From the current price of $578.29, that represents a decline of approximately 30.5%. A more severe outcome, such as a funding crisis or regulatory intervention, could push the stock below $400, implying a loss of over 30% from current levels. The 21.71% maximum drawdown over the past year already demonstrates the stock's vulnerability to rapid selloffs.
FAQ
The most severe risk is credit risk: subprime auto delinquencies have hit a 32-year high, and as a specialist in this segment, CACC is highly exposed to rising defaults. Second, financial leverage risk: debt-to-equity of 4.17x and a current ratio of 0.264 mean the company relies heavily on short-term funding, and a tightening of credit markets could raise funding costs or restrict access to capital. Third, valuation risk: while the stock is cheap, it could remain cheap if the credit cycle deteriorates, and the high beta of 1.349 means it will likely underperform in a market selloff. Fourth, competitive risk: larger, better-capitalized banks like Capital One could gain market share in subprime auto lending, pressuring CACC's originations and margins.
Our 12-month forecast has three scenarios: a base case (50% probability) with a target range of $600–$660, assuming credit conditions stabilize and earnings remain strong; a bull case (25% probability) targeting $660–$700, driven by declining delinquencies and multiple expansion; and a bear case (25% probability) targeting $400–$500, if subprime delinquencies continue to rise and force large provisions. The most likely scenario is the base case, where the stock trades around the analyst average target of $636.67, implying 10.1% upside. The key assumption is that subprime auto delinquencies plateau rather than accelerate, allowing CACC to maintain its recent earnings momentum.
CACC appears undervalued on most metrics. Its trailing PE of 11.6x and forward PE of 10.6x are below the broader market and near the low end of its historical range (which has ranged from 6.6x to 74.7x). Price-to-book of 3.22x is near the bottom of its historical 3.0x–5.6x band, and the PEG ratio of 0.129 is exceptionally low. The market is pricing in significant credit stress, as evidenced by the low multiple despite a 27.8% ROE and 23.4% net margin. If credit conditions stabilize, the stock could re-rate toward the mid-teens PE, implying 20-30% upside. However, if delinquencies worsen, the stock could de-rate further toward its 2021 low of 6.6x PE.
CACC is a good buy for value-oriented investors who can tolerate above-average volatility and have a medium-to-long-term horizon. The stock trades at 11.6x trailing earnings and 10.6x forward earnings, with a PEG of 0.129, suggesting it is cheap relative to its growth potential. Analyst targets imply 10.1% upside to the average price of $636.67, and the company generates strong free cash flow of $1.05 billion while buying back stock aggressively. However, the 32-year-high subprime auto delinquency rate is a major risk that could lead to higher loan-loss provisions and reverse recent earnings gains. Therefore, it is not a slam-dunk buy; it is a calculated bet on credit conditions stabilizing.
CACC is better suited for medium-to-long-term investment (at least 2-3 years) rather than short-term trading. The stock is highly volatile with a beta of 1.349 and a 21.71% maximum drawdown over the past year, making short-term price movements unpredictable. The company pays no dividend, so returns depend entirely on capital appreciation and buybacks. However, the deep-value valuation and strong cash flow generation provide a margin of safety for patient investors who can wait for the credit cycle to normalize. Short-term traders might find opportunities around earnings releases, but the high short interest (8.77 days-to-cover) and credit-sensitive nature make it risky for quick trades. A minimum holding period of 2-3 years is recommended to ride out potential credit deterioration.