4 Reasons To Invest In Credit Acceptance (CACC) Stock Now
Zacks Investment Research | Mar 07, 2019 08:07PM ET
It seems to be a wise idea to add Credit Acceptance Corporation (NASDAQ:CACC) stock to your portfolio now, given the strength in its fundamentals and good growth prospects. Moreover, its efficient capital deployment actions are expected to boost shareholder value.
The company’s Zacks Consensus Estimate for current-year earnings has been revised 2.8% upward over the past 30 days, reflecting analysts’ optimism regarding its earnings growth potential. Thus, the stock currently sports a Zacks Rank #1 (Strong Buy).
Notably, the stock has gained a little more than 14% in the past three months. Given the positive estimate revisions and a favorable Zacks Rank, this price performance is expected to improve further.
Here are a few other aspects that make Credit Acceptance an attractive investment option now.
Revenue Strength: Credit Acceptance’s revenues witnessed a five-year (2014-2018) CAGR of 15.5%, driven mainly by continued rise in finance charges. Moreover, given the decent rise in dealer enrollments and active dealers, the company’s top line is expected to improve further.
The company’s projected sales growth rates of 13.4% for 2019 and 6.5% for 2020 indicate constant upward momentum in revenues.
Earnings per Share (EPS) Growth: Credit Acceptance recorded EPS growth of 21%, (higher than the industry average of 1.4%) over the past three-five years. This uptrend is expected to continue in the near term as indicated by its estimated EPS growth rate of 16.4% for 2019 and 5.1% for 2020.
Also, the company’s long-term (three to five years) estimated EPS growth rate of 12.7% promises rewards for investors.
Superior Return on Equity (ROE): Credit Acceptance’s ROE is 29.89%, significantly higher than the industry’s average of 14.80%. This indicates that the company reinvests its cash more efficiently compared with the industry.
Favorable Growth Score: The stock has a Zacks Investment Research
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