Credit Acceptance Corporation had a good set of numbers for its Q22020 earnings release back in July 2020. Revenues rose year-on-year to $406.3 million, a growth of 9.6%. Operating expenses declined marginally from $81.8 million to $81.6 million. Net loan receivables were up from $6.38 billion to $6.75 billion.
Net income beats estimates
Net income for Q22020 was $5.4 per share, which is below the net income of $8.68 per share during the same quarter the prior year. However, given the economic situation with the pandemic, analysts had estimated net income to be around $4.6 per share. So, the earnings comfortably beat analyst estimates. The growth in revenues, coupled with a marginal decline in operating expenses, played a part in net income beating analyst estimates. It should be noted that the $8.68 per share figure includes certain non-recurring items.
Credit Acceptance Corporation’s stock performance
If you are looking to play the auto market, then auto lending is an interesting space to consider. It is true that auto manufacturing plants have been forced to close due to shelter-in-place orders from various governments. However, dealerships that have been nimble enough to concentrate on the online channel, as well as offer features like curbside car pickup, have managed to do some sales. Used cars are also in demand as people tighten their purse strings due to the economic fallout of the pandemic. Credit Acceptance Corporation’s stock returned a staggering 140% between the April-August time-period. That would have made the company one of the best finance stocks 2020. Since then, it has fallen because of a couple of negative developments related to a Massachusetts lawsuit.
Credit Acceptance Corporation – an option among the top auto related stocks
Credit Acceptance Corporation serves a niche target audience of bad credit, no credit, and subprime customers. These are individuals who would otherwise not have access to traditional sources of financing to purchase a vehicle. So, it’s a win for dealers as they get to sell to a new customer base and it’s also a win for buyers who have no other source of auto financing.