Credit Acceptance(US:CACC) ZACKSยท2024-08-09 13:35Core Viewpoint - Credit Acceptance Corporation (CACC) is positioned for growth in auto loan demand, but faces challenges from high expenses, declining credit quality, and significant debt levels [1]. Financial Performance - Credit Acceptance's revenues have experienced a compound annual growth rate (CAGR) of 10.1% from 2016 to 2023, with finance charges making up 92.4% of total revenues in the first half of 2024 [2]. - The company had total debt of $5.86 billion as of June 30, 2024, compared to cash and cash equivalents of $517.6 million, indicating a significant debt burden [3]. Capital Management - The company prefers stock repurchases over dividends, having authorized an additional 2 million shares for repurchase in August 2023, with 1.35 million shares remaining as of June 30, 2024 [4]. Expense Trends - Operating expenses have risen with a CAGR of 10.4% from 2017 to 2023, continuing into the first half of 2024, driven by hiring efforts [5]. Asset Quality Concerns - Credit quality has deteriorated, with provisions for credit losses increasing since 2020, and expected to remain elevated due to rising loan balances and a challenging macroeconomic environment [6]. Market Sentiment - The Zacks Consensus Estimate for CACC's 2024 earnings has been revised down by 18.1%, with the company's shares down 13% this year, contrasting with a 7.8% industry growth [7].