Credit Acceptance Corporation (CACC): A Bull Case Theory

We came across a bullish thesis on Credit Acceptance Corporation on Valueinvestorsclub.com by Djokovic1. In this article, we will summarize the bulls’ thesis on CACC. Credit Acceptance Corporation's share was trading at $492.87 as of October 9th. CACC’s trailing and forward P/E were 13.87 and 10.34 respectively according to Yahoo Finance.

Credit Acceptance Corporation (CACC), a seasoned subprime auto lender with over 50 years of operations, has compounded shareholder value massively, its stock has returned 170x since 1992, a 25% CAGR. Despite its strong franchise and disciplined capital allocation framework, the stock trades near the same level as six years ago, at only ~8x normalized EPS, even as the loan book expanded by ~50% and share count halved. The recent stagnation stems from declining EPS, driven by lower returns on capital (now below 10%) and rising interest costs amid higher rates. However, these pressures appear temporary.

CACC’s recent underperformance traces primarily to weak 2021–2023 loan cohorts, which dragged down revenue yields and profitability. As these cohorts season and run off, while newer vintages under stricter underwriting deliver better economics, earnings are poised to rebound sharply from 2026 onward. Management’s conservative adjustments and improving revenue and finance charge yields, combined with sustained dealer participation, suggest the earnings inflection is underway. The company’s Q2 2025 results, burdened by a one-off litigation accrual, masked stronger underlying performance, reinforcing that consensus estimates understate true earnings power.

With the CFPB lawsuit withdrawal removing a regulatory overhang, and the potential for significant buybacks enhancing per-share value, CACC’s setup is compelling. Trading at 11x 2025E EPS but likely to exceed $60 EPS by 2026 and $100 by 2029, the stock offers a 30%+ expected IRR. Even modest multiple expansion or continued aggressive repurchases could drive substantial upside, making current levels an attractive long-term entry point.

Previously we covered a bullish thesis on Upstart Holdings, Inc. (UPST) by Unconventional Value in March 2025, which highlighted the company’s AI-driven disruption in credit markets and improving model accuracy. The company’s stock price has depreciated approximately by 5.60% since our coverage as macro headwinds weighed on performance. The thesis still stands as Upstart continues refining its AI models. Djokovic1 shares a similar view on the credit sector but emphasizes Credit Acceptance Corporation’s disciplined underwriting and earnings rebound potential.

Credit Acceptance Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held CACC at the end of the second quarter which was 37 in the previous quarter. While we acknowledge the potential of CACC as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.