CACC

Credit Acceptance is a highly profitable, idiosyncratic subprime auto lender, and FY2025 was a strong recovery year. Net income rose 71.0% to $424M and diluted EPS jumped 83.0% to $36.38 — the EPS outpacing net income because the company repurchased $725M of stock (+131.5%) and shrank its share count 10.7%. Revenue grew 7.2% to $2.32B, and the franchise's hallmark profitability reasserted itself: a 18.3% net margin and a 27.8% return on equity, the latter boosted by the leverage inherent in its lending model. After earnings troughed at $286M (FY2023) and $248M (FY2024) amid elevated loan-loss provisioning and funding costs, the rebound suggests credit and spreads are normalizing.

The business model is durable but controversial. CACC advances funds to franchised/independent dealers against deep-subprime auto loans and shares in collections — a high-yield niche with structural demand but acute sensitivity to consumer credit stress, used-car values, and the regulatory/litigation scrutiny that subprime lenders perennially attract. The capital structure reflects a finance company: liabilities/equity is 4.67x, cash is minimal at $22.8M (cash is not the relevant liquidity metric here — the $1.05B of operating cash flow and securitization funding are), and aggressive buybacks have deliberately reduced equity 12.9% to $1.52B, a capital-allocation choice that magnifies both ROE and risk.