Interest rates are beginning to rise again. Low-interest rates had squeezed the net interest incomes lenders were earning. However, with inflation now expected to rise, interest rates on treasuries seem to have trended up. Now maybe a good time to look at finance stocks, especially with economic recovery under focus on stimulus spending expected to drive near-to-mid-term growth. Certain pockets within the industry look particularly interesting. For example, Credit Acceptance Corp is an auto finance company that offers auto loans to borrowers with no credit or bad credit. These kinds of companies are candidates for being compelling finance stocks to invest in now. They have been performing well and are addressing an area in the market that other lenders aren’t focused on.
Credit Acceptance Corp Reports Fourth-Quarter 2020 Earnings
Credit Acceptance Corp reported its fourth-quarter 2020 earnings results on 1st February 2021. Revenue was up from $385 million in Q42019 to $447 million. Diluted earnings per share rose from $8.6 in Q42019 to $9.4 in Q42020. However, the company is still in the process of recovering from the pandemic. Company CEO Brett Roberts said, “We’re not back to normal at this point. So again we’re giving the customers a lot of room. We know it’s a difficult environment for many of them. And so we’re giving them extra time to make their payments, and so repossessions aren’t yet back to where they normally would be.” Given the company’s unique positioning and positive Q4 results, it is among the best finance stocks to buy now.
Credit Acceptance’s stock has gained over 9% since 2nd February 2021. Its price closed at $363 on 26th February 2021. On a longer-term basis, the stock is up 73% over the preceding five years. Since the March 2020 market crash, Credit Acceptance Corp had risen 130% only to fall back down 40% between August 2020 and September 2020. Since then, the price has recovered about 20%.