Douglas W Busk Executes Sell Order: Offloads $289K In Credit Acceptance Stock

Douglas W Busk, Chief Treasury Officer at Credit Acceptance CACC, executed a substantial insider sell on February 6, according to an SEC filing.

What Happened: Busk's recent Form 4 filing with the U.S. Securities and Exchange Commission on Tuesday unveiled the sale of 500 shares of Credit Acceptance. The total transaction value is $289,990.

At Wednesday morning, Credit Acceptance shares are down by 0.0%, trading at $554.51.

Delving into Credit Acceptance's Background

Credit Acceptance Corp is a consumer finance company that specializes in automobile loans. These loans are offered through a U.S. nationwide network of automobile dealers that benefit from sales of vehicles to consumers who could otherwise not obtain financing. The company also benefits from repeat and referral sales, and from sales to customers responding to advertisements for financing, but qualify for traditional financing. The company derives its revenue from finance charges, premiums earned on the reinsurance of vehicle service contracts, and other fees. Of these, financing charges, including servicing fees, are by far the largest source of revenue.

Credit Acceptance: A Financial Overview

Decline in Revenue: Over the 3 months period, Credit Acceptance faced challenges, resulting in a decline of approximately 0.0% in revenue growth as of 31 December, 2023. This signifies a reduction in the company's top-line earnings. As compared to competitors, the company encountered difficulties, with a growth rate lower than the average among peers in the Financials sector.

Evaluating Earnings Performance:

• Gross Margin: The company maintains a high gross margin of 65.87%, indicating strong cost management and profitability compared to its peers.

• Earnings per Share (EPS): With an EPS below industry norms, Credit Acceptance exhibits below-average bottom-line performance with a current EPS of 7.33.

Debt Management: Credit Acceptance's debt-to-equity ratio stands notably higher than the industry average, reaching 2.89. This indicates a heavier reliance on borrowed funds, raising concerns about financial leverage.

Assessing Valuation Metrics:

• Price to Earnings (P/E) Ratio: Credit Acceptance's current Price to Earnings (P/E) ratio of 25.27 is higher than the industry average, indicating that the stock may be overvalued according to market sentiment.

• Price to Sales (P/S) Ratio: A higher-than-average P/S ratio of 3.94 suggests overvaluation in the eyes of investors, considering sales performance.

• EV/EBITDA Analysis (Enterprise Value to its Earnings Before Interest, Taxes, Depreciation & Amortization): Credit Acceptance's EV/EBITDA ratio, surpassing industry averages at 39.71, positions it with an above-average valuation in the market.

Market Capitalization: Boasting an elevated market capitalization, the company surpasses industry averages. This signals substantial size and strong market recognition.

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Delving Into the Significance of Insider Transactions

Insider transactions shouldn't be used primarily to make an investing decision, however, they can be an important factor for an investor to consider.

Exploring the legal landscape, an "insider" is defined as any officer, director, or beneficial owner holding more than ten percent of a company's equity securities, as stipulated by Section 12 of the Securities Exchange Act of 1934. This encompasses executives in the c-suite and major hedge funds. These insiders are required to report their transactions through a Form 4 filing, which must be submitted within two business days of the transaction.

Highlighted by a company insider's new purchase, there's a positive anticipation for the stock to rise.

But, insider sells may not necessarily indicate a bearish view and can be motivated by various factors.

A Deep Dive into Insider Transaction Codes

When it comes to transactions, investors tend to focus on those in the open market, detailed in Table I of the Form 4 filing. A P in Box 3 denotes a purchase, while S indicates a sale. Transaction code C signals the conversion of an option, and transaction code A denotes a grant, award, or other acquisition of securities from the company.

Check Out The Full List Of Credit Acceptance's Insider Trades.

This article was generated by Benzinga's automated content engine and reviewed by an editor.