CREDIT ACCEPTANCE CORP (CACC): what the price requires

At today's price, CREDIT ACCEPTANCE CORP (CACC) is priced for today's economics sustained for ~7.5 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-19 · Source: https://boothcheck.com/report/CACC

Headline

FieldValue
TickerCACC
CompanyCREDIT ACCEPTANCE CORP
Current price$625.35/sh

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed12.6%
Operating margin today25.2%
Margin compression implied-12.6pp
Must persist for7.5y
Multiple paid14x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 13.9% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.8 years.

Reconcile: at the x-ray's 9.3% required return this reads ~5.8%/yr; the models below use their own rates.

How unusual the bet is: high

ReferenceValue
vs own history+3.03σ
cohort percentile (of 16 peers)25
sustained it ~7.5 years at this level20%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.16x4expensive
Earnings1.14x4expensive
Relative0.71x4justifies
Growth0.77x2justifies

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.0%); the inversion above states its own rate.

Per-Model Detail (n=14)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
DCF Exit MultipleGrowth$1214.400.51xyesExit EV/EBITDA: 17033.3x / 17035.3x / 17037.3x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$519.481.20xyesP/E 12x (static sector reference · 2026-04), scenarios: 10.1x / 12.0x / 13.9x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$447.471.40xyesBV/sh $138.22, ROE (TTM) 29.9%, ke 9.3%
Two-Stage Excess ReturnAsset$830.620.75xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$608.551.03xyesRev $2.3B, growth 5% (input: historical growth; tapered), Terminal P/S: 2.5x / 2.9x / 3.4x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$1404.200.45xyesEPS $40.12, growth 35% (input: historical EPS growth), PEG=0.43 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset$682.120.92xyesBV $138.22 + 5yr PV of (ROE (TTM) 29.9% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$353.231.77xyes√(22.5 × EPS $40.12 × BVPS $138.22) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings$575.571.09xyesFCF $1052.6M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$527.111.19xyesSBC-adj FCF $1.00B (FCF $1.05B − SBC $0.05B) capitalized at Kₑ
Ben Graham FormulaEarnings$1294.540.48xyesEPS $40.12 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$637.050.98xyesRevenue $2.33B × sector P/S 3.0x
PEG Fair ValueRelative$1504.500.42xyesEPS $40.12 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$433.731.44xyesEPS $40.12 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$1.7b
Net debt / NOPAT (after-tax)3.81x
Net debt / operating income (pre-tax)2.96x
Interest coverage1.3x
Share count CAGR (buyback)-6.5%
Burning cashno

Bullet Takeaways

Bull Case

The first quarter of 2026 marked the kind of inflection a lender's bull case lives on: the bleeding slowed almost to a stop. Credit Acceptance's forecast of net cash flows from its existing loan portfolio fell by just $9.1 million, or 0.1%, the smallest quarterly decline in three years, and the pace of new-loan volume decline moderated to 4.3% from 9.1% the prior quarter. GAAP net income was $135.8 million and GAAP diluted earnings were $12.40 per share for the quarter. For a company whose recent story has been deteriorating loan performance and shrinking volume, two quarters of moderation in both is the evidence that the cycle is turning, and the trailing return on equity near 30% shows how profitable the model is when collections behave.

The reason the returns are so high is a business design that is genuinely unusual, and it is worth stating plainly because it is the whole moat. Credit Acceptance does not simply buy subprime loans and absorb the losses. Under its Portfolio Program, as the 10-K describes, "Amounts advanced to Dealers for Consumer Loans assigned under the Portfolio Program are recorded as Dealer Loans", and the dealer retains a financial interest in how the loan performs. The dealer shares in the upside of collections and the downside of defaults, which aligns the people originating the loans with the company holding them. That structure lets Credit Acceptance lend to borrowers other lenders will not touch, because the risk is split rather than fully owned, and it is the reason the company has earned outsized returns through cycles that have sunk other subprime lenders.

Capital allocation closes the loop. The company is a relentless buyer of its own stock, repurchasing 365,258 shares in the first quarter, equal to 3.4% of shares outstanding, for $178.9 million, and the trailing share count has been shrinking at roughly a 6.5% annual pace. When a business earning a near-30% return on equity buys back that much of itself, the per-share economics compound quickly, because each remaining share owns a larger claim on a high-return loan book. A buyer here is partnering with a management team that has consistently chosen to shrink the share count rather than chase growth at lower returns.

Bear Case

Everything in Credit Acceptance's reported value depends on a single forecast, and that dependency is the bear case. The company carries loans receivable of $11.6 billion against an allowance for credit losses of $3.6 billion, leaving net loans of about $8.0 billion. The gap between gross and net is the company's estimate of what it will never collect, and the reported earnings rise or fall with that estimate. The entire income statement is, in effect, a bet that management can predict how much money deep-subprime borrowers will repay over the life of multiyear loans. When that forecast is revised down, as it has been repeatedly in recent years, the value of the portfolio falls with it, and the most fragile assumption baked into the price is that those downward revisions have now ended rather than paused.

The borrower base makes the forecast inherently treacherous. These are customers with damaged or no credit, the people most exposed to a weakening labor market, rising living costs, and higher used-car prices that push loan sizes up. A subprime auto book is one of the first places economic stress shows up, and the recent multiyear decline in forecasted collections is the company telling investors its earlier optimism was misplaced. The first-quarter stabilization is encouraging, but one quarter of a near-flat forecast does not prove the trend has reversed; it proves it slowed.

The legal and funding risks compound the credit risk. Credit Acceptance has been the target of regulatory and law-enforcement action over how it discloses loan costs, and its own filing acknowledges that the "penalties that may be claimed by consumers, regulatory agencies, Dealers, vendors, or other third parties in these types of matters can be substantial" and may include punitive damages and injunctive relief. The federal Consumer Financial Protection Bureau withdrew from its joint suit in 2025, but the New York attorney general remains as sole plaintiff, so the overhang persists. Funding is the other pressure point: a lender must continually borrow to lend, and Credit Acceptance carries roughly $1.75 billion of debt with interest covered only about 1.3 times by operating income. If credit markets tighten or its loan performance deteriorates, its cost of funding rises precisely when its collections fall, the two squeezing the spread that is the entire business.

Valuation

Credit Acceptance is a lender, so the way to read its price is through the return it earns on its capital and the credibility of its loan-loss estimates, not through an operating multiple or a cash-flow yield. The reported free-cash-flow figures are distorted by the timing of loan originations and collections, and an enterprise-value-to-EBITDA reading is meaningless for a finance company, so those lenses should be set aside. What matters is that the business earns a trailing return on equity near 30% against a book value of about $138 per share, and the stock trades near $580 (June 27, 2026), or roughly four times book. That premium to book is the market saying the high returns are durable.

Inverting the price puts the bet in focus. At today's level the market is paying about 13 times company-wide operating income, which requires operating profit to keep growing near its self-funding ceiling for roughly seven years. That pace runs above what the company has actually delivered recently, where loan volume has been declining, so the price is extrapolating a recovery and a return to growth rather than the recent contraction. Historically only about a fifth of companies sustain that kind of pace for seven years. Encouragingly for the bull, the static value methods are not screaming overvaluation here: several asset-based and earnings-power methods land near or above the price, which is why this reads as a value-and-execution bet rather than a pure growth-premium one. The disagreement is less about whether the business is worth something and more about whether the recent stabilization holds.

Solvency for a lender is about funding and the quality of the loan book, not corporate leverage in the usual sense. The roughly $1.75 billion of debt is the raw material the company lends out, and the thin interest coverage near 1.3 times reflects that funding cost is a large line for any lender. The real solvency question is the $3.6 billion allowance against $11.6 billion of gross loans: if that allowance proves adequate, the earnings are real and the buyback compounds them; if collections disappoint again, the allowance grows, earnings fall, and the premium to book the price pays is exposed. What a buyer at this price underwrites is that management's collection forecasts have finally stabilized and that the near-30% returns persist long enough to justify paying four times the book value those returns are earned on.

Catalysts

The forecast of future collections is the number that moves this stock, and the first quarter of 2026 delivered the most encouraging reading in years. Forecasted net cash flows from the loan portfolio declined only $9.1 million, or 0.1%, the smallest quarterly decline in three years, while new-loan unit volume fell 4.3%, a meaningful moderation from the 9.1% decline the prior quarter. GAAP earnings were $12.40 per share for the quarter, though revenue of about $580 million slightly missed expectations. Each subsequent quarter's forecast revision is the cleanest signal of whether the stabilization is real.

Capital deployment continues to be aggressive and steady. The company repurchased 365,258 shares in the quarter, about 3.4% of shares outstanding, for $178.9 million, extending a long pattern of shrinking the share count rather than chasing lower-return growth. Against a near-30% return on equity, the pace of buybacks is itself a driver of per-share value.

The legal overhang is the catalyst that could cut the other way. The federal Consumer Financial Protection Bureau withdrew from its joint lawsuit over loan-cost disclosures in 2025, narrowing the case, but the New York attorney general remains the sole plaintiff. Resolution on favorable terms would remove a discount the market has applied; an adverse outcome, given that penalties in such matters can be substantial, would be a direct hit to the thesis.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Credit Acceptance Q1 2026 results, May 5, 2026 · CFPB filing, April 2025

View the full interactive CACC report on boothcheck