Credit Acceptance Corporation has had a tough Q12020. The company reported a loss of $4.61 per share. The amount for credit loss provisions also increased quite significantly to $354.7 million. However, the rise was mainly due to the adoption of CECL. If non-recurring items were excluded, then net income on a non-GAAP basis was $9.66 a share, a growth of around 14% Y-o-Y.
On a positive note, revenues were up 10% Y-o-Y to $389.1 million driven mainly by finance charges. Operating expenses also declined by 2.8% Y-o-Y to $79.1 million due to lower wages and salaries. Total stockholder’s equity was down 16.5% Y-o-Y to $2 billion. Over a longer term, earnings have grown at an average annual rate of about 24% for the last five years. The industry growth rate is around 11%.
The ROE in the last one year, of 30%, has also outpaced the industry average of around 14%. Lastly, revenues grew at a CAGR of over 15% during the last 6 years. Credit Acceptance Corporation was founded in 1972 and partners with automobile dealers to provide financing to prime and sub-prime auto buyers. The company’s model is unique in the sense that it partners directly with auto dealers rather than purchase a loan which the dealer originates.
Credit Acceptance Corporation reports loan repayments to three major credit bureaus. That is an incentive for sub-prime borrowers who make their repayments on time and help improve their credit scores as a result.
CACC stock closed at $421.81 on 2nd July 2020, up 1.27% for the past month. The NASDAQ, meanwhile, is up 5.42% over the past month.