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Category: Credit Acceptance Corp (CACC)
Date: 3 November 2020 Stock price of Credit Acceptance Corp: $314.70 We cover the 3rd quarter 2020 earnings report of Credit Acceptance Corporation (CACC) a firm that offers finance programs that allows dealers to sell to consumers regardless of their credit record. The group recorded revenues of $426.5 million and net income $242.1 million.
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COVID-19 continues to be widespread in the United States. In an effort to contain the virus, authorities implemented various measures, including travel bans, stay-at-home orders and shutdowns of non-essential businesses. These measures caused a significant decline in economic activity and a dramatic increase in unemployment. While the prevalence, severity and impact of such restrictions have lessened and unemployment rates have improved "
More About Credit Acceptance Corporation
Since 1972, Credit Acceptance has offered financing programs that enable automobile dealers to sell vehicles to consumers, regardless of their credit history. Our financing programs are offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements for our financing programs, but who actually end up qualifying for traditional financing.
Without our financing programs, consumers are often unable to purchase vehicles or they purchase unreliable ones. Further, as we report to the three national credit reporting agencies, an important ancillary benefit of our programs is that we provide consumers with an opportunity to improve their lives by improving their credit score and move on to more traditional sources of financing. Credit Acceptance is publicly traded on the Nasdaq Stock Market under the symbol CACC.
Without our financing programs, consumers are often unable to purchase vehicles or they purchase unreliable ones. Further, as we report to the three national credit reporting agencies, an important ancillary benefit of our programs is that we provide consumers with an opportunity to improve their lives by improving their credit score and move on to more traditional sources of financing. Credit Acceptance is publicly traded on the Nasdaq Stock Market under the symbol CACC.
Overview of Credit Acceptance Corporation 3rd quarter 2020 earnings
The data below refers to the latest quarter unless specified otherwise:
- Total Revenue: $426.5 million (up from $378.7 million from the same quarter of the previous year)
- Total Revenue increased by 12.6% over the last 12 months
- Total cost and expenses: $108.1 million (down from $159.6 million for the same quarter of the previous year)
- Total cost and expenses increased by -32.2% over the last 12 months
- Some margin gains for Credit Acceptance as revenues increased at a faster rate than their cost and expenses which actually declined
- Net income: $242.1 million (up from $165.4 million for the same quarter of the previous year)
- Diluted earnings per share: $13.56 (up from $8.73 for the same quarter of the previous year)
- PE ratio of Credit Acceptance: 15.9
- Diluted weighted-average shares outstanding: 17.849 million (down from 18.950 million for the same quarter of the previous year)
- Cash and cash equivalents: $8.9 million
- Cash and cash equivalents per share: $0.49
- Cash and cash equivalents makes up 0.16% of Credit Acceptance's market capital
- Cash and cash equivalents makes up 0.12% of Credit Acceptance's total assets
- Stockholders equity of Credit Acceptance: $2.308 billion
- Stockholders equity per share: $129.30
- Amazon is trading at 2.42 times its stockholders equity which is well outside the expected range of between 2 and 4 which most companies tend to trade at.
- For some perspective the average price to book value of firms in the S&P 500 is 3.8 times.
Credit Acceptance Corporation management commentary on their 3rd quarter 2020 earnings
Southfield, Michigan, Oct. 29, 2020 (GLOBE NEWSWIRE) -- Credit Acceptance Corporation (Nasdaq: CACC) (referred to as the “Company”, “Credit Acceptance”, “we”, “our”, or “us”) today announced consolidated net income of $242.1 million, or $13.56 per diluted share, for the three months ended September 30, 2020 compared to consolidated net income of $165.4 million, or $8.73 per diluted share, for the same period in 2019. For the nine months ended September 30, 2020, consolidated net income was $254.7 million, or $14.17 per diluted share, compared to consolidated net income of $494.2 million, or $26.06 per diluted share, for the same period in 2019. Adjusted net income, a non-GAAP financial measure, for the three months ended September 30, 2020 was $167.0 million, or $9.36 per diluted share, compared to $168.4 million, or $8.89 per diluted share, for the same period in 2019. For the nine months ended September 30, 2020, adjusted net income was $496.8 million, or $27.64 per diluted share, compared to adjusted net income of $484.9 million, or $25.56 per diluted share, for the same period in 2019.
COVID-19 Pandemic
COVID-19 continues to be widespread in the United States. In an effort to contain the virus, authorities implemented various measures, including travel bans, stay-at-home orders and shutdowns of non-essential businesses. These measures caused a significant decline in economic activity and a dramatic increase in unemployment. While the prevalence, severity and impact of such restrictions have lessened and unemployment rates have improved, uncertainty remains as to when economic conditions will return to normalcy and whether further restrictions may be required. Starting in mid-March, we experienced a substantial reduction in demand for our product and a significant decline in cash flows from our loan portfolio that lasted through mid-April, after which collections and new loan volumes improved significantly. Starting in late July and continuing into October, we have experienced another substantial reduction in demand for our product. As the virus is not yet fully contained, the ultimate impact of the pandemic on our business is not yet known. The impact will depend on future developments, including, but not limited to, the duration of the pandemic, its severity, the actions to contain the disease or mitigate its impact, additional federal stimulus measures and enhanced unemployment benefits, if any, and the duration, timing and severity of the impact on consumer behavior and economic activity.
COVID-19 Pandemic
COVID-19 continues to be widespread in the United States. In an effort to contain the virus, authorities implemented various measures, including travel bans, stay-at-home orders and shutdowns of non-essential businesses. These measures caused a significant decline in economic activity and a dramatic increase in unemployment. While the prevalence, severity and impact of such restrictions have lessened and unemployment rates have improved, uncertainty remains as to when economic conditions will return to normalcy and whether further restrictions may be required. Starting in mid-March, we experienced a substantial reduction in demand for our product and a significant decline in cash flows from our loan portfolio that lasted through mid-April, after which collections and new loan volumes improved significantly. Starting in late July and continuing into October, we have experienced another substantial reduction in demand for our product. As the virus is not yet fully contained, the ultimate impact of the pandemic on our business is not yet known. The impact will depend on future developments, including, but not limited to, the duration of the pandemic, its severity, the actions to contain the disease or mitigate its impact, additional federal stimulus measures and enhanced unemployment benefits, if any, and the duration, timing and severity of the impact on consumer behavior and economic activity.
Consumer Loan Metrics
Dealers assign retail installment contracts (referred to as “Consumer Loans”) to Credit Acceptance. At the time a Consumer Loan is submitted to us for assignment, we forecast future expected cash flows from the Consumer Loan. Based on the amount and timing of these forecasts and expected expense levels, an advance or one-time purchase payment is made to the related dealer at a price designed to maximize economic profit, a non-GAAP financial measure that considers our return on capital, our cost of capital and the amount of capital invested. We use a statistical model to estimate the expected collection rate for each Consumer Loan at the time of assignment. We continue to evaluate the expected collection rate of each Consumer Loan subsequent to assignment. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast
Dealers assign retail installment contracts (referred to as “Consumer Loans”) to Credit Acceptance. At the time a Consumer Loan is submitted to us for assignment, we forecast future expected cash flows from the Consumer Loan. Based on the amount and timing of these forecasts and expected expense levels, an advance or one-time purchase payment is made to the related dealer at a price designed to maximize economic profit, a non-GAAP financial measure that considers our return on capital, our cost of capital and the amount of capital invested. We use a statistical model to estimate the expected collection rate for each Consumer Loan at the time of assignment. We continue to evaluate the expected collection rate of each Consumer Loan subsequent to assignment. Our evaluation becomes more accurate as the Consumer Loans age, as we use actual performance data in our forecast
Credit Acceptance Corporation (CACC) stock price history over the last 5 years
The image below shows the stock price history of Credit Acceptance Corporation (CACC) over the last 5 years. And its been a very good time for Credit Acceptance Corporation stockholders. 5 years ago the stock was trading at $179 a stock and its currently trading at $314.70. That's a strong % returned provided to Credit Acceptance stockholders over the last 5 years.
The stock of Credit Acceptance is trading at closer to its 52 week low than it is to its 52 week high, which is an indication that the short term sentiment and momentum of Credit Acceptance is negative at this point in time
The stock of Credit Acceptance is trading at closer to its 52 week low than it is to its 52 week high, which is an indication that the short term sentiment and momentum of Credit Acceptance is negative at this point in time
Latest stock valuation of Credit Acceptance Corporation
So based on their 3rd quarter 2020 earnings report what do we value the stock of Credit Acceptance Corporation at? Based on the the earnings reported our stock valuation model provides a target price of $315 per Credit Acceptance Corporation stock. Therefore we rate the stock of Credit Acceptance Corporation as fully valued.
We usually recommend that fundamental long term and value investors look to enter a stock at least 10% below our target price, which in this case is $315 a stock. A good entry point into the stock of Credit Acceptance Corporation would therefore be at $283.50 or below.
We expect the stock of Credit Acceptance Corporation to trade in a narrow range around its current price in coming weeks and months. All things considered we rate the stock of Credit Acceptance Corporation as a hold
We usually recommend that fundamental long term and value investors look to enter a stock at least 10% below our target price, which in this case is $315 a stock. A good entry point into the stock of Credit Acceptance Corporation would therefore be at $283.50 or below.
We expect the stock of Credit Acceptance Corporation to trade in a narrow range around its current price in coming weeks and months. All things considered we rate the stock of Credit Acceptance Corporation as a hold
Next earnings release of Credit Acceptance Corporation
It is expected that Credit Acceptance Corporation will release their 4th quarter 2020 earnings report in early February 2021
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