Credit Acceptance (CACC): How the Latest $500M Financing Shapes Its Current Valuation

Credit Acceptance (CACC) has just wrapped up a $500 million asset-backed financing, shifting roughly $625 million in loans into a dedicated entity. This move allows the company to refinance higher-cost debt and unlock more financial flexibility for future needs.

See our latest analysis for Credit Acceptance.

After a rocky month, Credit Acceptance’s recent financing news appears to have reassured the market. The stock is up nearly 2% for the week following a 10% pullback in the last 30 days. While momentum has faded year-to-date, those holding over the long run have still seen an impressive 53% total return over five years. This demonstrates the business's resilience and recovery potential even through bumps in the road.

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With shares rallying after the latest deal and solid long-term returns in the rearview mirror, investors have to ask whether there is still value left to unlock or if the stock’s future gains are already priced in.

Most Popular Narrative: 1% Undervalued

At $441.30 a share, Credit Acceptance sits just below its widely tracked fair value estimate of $446.25. This suggests the stock is right around consensus expectations. Investors closely following analyst narratives will want to pay attention to the details behind this alignment.

The recent investments in technology modernization, including a revamped loan origination system and accelerated feature development, should improve customer and dealer experiences. These efforts may drive operating efficiency and support net margin improvement through cost reductions. Adoption of more advanced data analytics and ongoing scorecard updates are expected to enhance risk assessment and loan performance over coming vintages, reducing future default rates and stabilizing or expanding net margins and earnings.

Read the complete narrative.

Curious how ambitious tech upgrades and analytics are factored into this near-fair valuation? Behind the scenes are bold growth levers and margin shifts that analysts are betting on. But which crucial assumptions had the biggest impact? Tap in for the full breakdown that shapes analyst consensus.

Result: Fair Value of $446.25 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent credit risk from underperforming loan vintages and intensified competition could threaten Credit Acceptance’s growth outlook and put pressure on future returns.

Find out about the key risks to this Credit Acceptance narrative.

Another View: Multiples Show a Different Story

While consensus fair value puts Credit Acceptance just below analyst targets, our comparison to industry price-to-earnings ratios tells a more complex tale. The company's ratio of 10.7x is below the peer average of 36.7x but slightly above the Consumer Finance industry average of 9.9x. The fair ratio sits at 13.8x, which suggests there might be room for upside, though it may also reflect unique risks. Is the market properly pricing in these factors, or is there hidden value waiting to emerge?

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Credit Acceptance for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 908 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Credit Acceptance Narrative

Don’t just take these perspectives at face value. Dive into the numbers, put the story to the test, and shape your own market narrative in just minutes. Do it your way

A great starting point for your Credit Acceptance research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.